Interest rate on Mortgage

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If my interest rate is approx. 2.5% then why is the Interest Amount I have to pay is $1,290 and
Loan Principal payment just $1,414.11? This looks like an almost 100% interest payment.

chicagoan

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Look at your amortization schedule. In the beginning you pay mostly interest and a lot less principal. But as time goes by your interest payment decreases and principal payment increases.

nepalbanda

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Loan amount of $600,000 @2.5% will cost you $15,000 in interest per year, that will translate to $1,250 a month in interest only. Faster you pay down that principal more of your payment will go to principal rather than interest.

Jai Nepal

Lights88

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Thats how bank survive.

laffinbuddha

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@nepalbanda. apparently, you dont know how banking/loan process works. When you take a loan, your payment goes towards interest first, not principal. Else, there would be no point of banks lending any money lol.

If you take a 30 year mortgage, you will be paying HEAVILY towards interest for the first 20 years. Essentially, if you lost your job and couldnt pay mortage after 15 years, you will be screwed.

nepalbanda

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Please refer to mortgage amortization schedule. My reference was for first payment only. You pay interest only for the principal amount you owe. If you load up and pay down your principal then your amortization will change and interest rate will change for your benefit accordingly.

Google:- mortgage amortization schedule > click on bankrate.com/mortgage/amortization and fill out your number and check.

You will understand my math and language. Interest you pay is directly related to principal balance of your loan. And again, you are right as well since your principal is high at the beginning you pay more interest and at/around end your principal is low so you pay less interest.

Jai Nepal

Rockb

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Smart folks! Would you buy a house right now? Or should you wait? You know it can always be refinanced down the road

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