Ralfcoder
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It's very normal. Count on paying mostly interest for the first half of the loan, or maybe longer. That's just the way a mortgage works. If you want to do something about it, add extra money towards each payment.
A $100,000 mortgage at 6% for 30 years will have a payment of about $600/month, with $100 paid on the principal the first payment. After 5 years, you're only paying about $135 towards the principal each month. It takes 18 years to get to the point where more than half of the payment goes towards the principal, if you stick to the original payment amount.
The way around this is to pay more towards the principal than what the original terms call for. On my example, paying $650 cuts about 5 years off the life of the loan. $700 cuts it down to a 21 year mortgage. |
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Alterfemego
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Yes, try the first several years. |
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sarah W
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ya most of your loan is interest really i looked at my amortization chart with what I pay my house would be paid off in 10yrs I pay 20 years in interest. Why I rent out the spare rooms so I can make payments directly to the principal |
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ann
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Yes, make that first yearS |
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sortaclarksville
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Yes, how much you pay each month in interest is based on what your principle balance is. As you pay down your principal, you owe less and less interest each month. However, since your payment stays the same, you pay less and less toward interest each month and more toward the principle. By the time you get to the last 5-10 years of your loan, you are paying very little interest and almost all goes toward principle. |
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machupi1
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yes, at the beginning, your payments should be primarily interest. The ratio of interest to principle will reduce throughout the lifetime of the loan. |
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Year 2012
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For example if you have a loan with an interset rate of 6% over 30 years, then the intersert ratio to principle is as following
First year 99% interest.... 1% to Principle.
Fifth year 93% interset ....7% Principle.
Tenth year 83.5% interest.....16.5 Principle
Fifteen year 71% interset... 29 Principle
Twenty-one Year 50/ 50 |
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matzael
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Yep.
If you have amortization tables provided by the lender they'll show this, but the first few years are pretty much just interest payments...even on a fully amortizing loan.
If you don't have that table (it's probably about 8 pages long with your balance on the mortgage and how much interest you've paid after each payment) you can get a new one.
One calculator to figure this out is at:
http://www.hsh.com/calc-amort.html
There are probably about 100 of those on the web though if you want to use a different one. |
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rlloydevans
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During the first several years the payment is mostly interest. The ratio of the part of the payment that goes to principal and interest slowly changes throughout the life of the loan until there is almost all principal and very little interest paid on the final payments.
This is why extra principal payments made early in the life of the loan can have some great payoffs in saved interest if you keep the loan for 7 or more years. |
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Alissa
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You'll be paying mostly interest for a lot more than one year. Go to microsoft.com and download an ammortization chart. Enter in your loan details and it'll tell you actually how much goes into interest and how much goes into principal. |
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gefyonx
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Yes.
Ask for your amortization schedule. You will see that as time goes on, the amount going to interest goes down and the amount going to principal goes up.
Making extra principal payments is best early in the loan. |
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Cinthia P
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i'm not sure, but i think this site has the answer to this particular question. they've got lots of stuff about this anyway. |
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kaffegeek
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yes |
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Gravedigger
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Oh yes. If you want to pay it down faster, you need to pay more that the amount on your monthly payment and tell them to apply the overage to the principal. |
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Peter T
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Your mortgage is paid off on a sloped basis.
In the beginning your payments are mostly interest and taxes and very little equity (1%?). Around the middle of the term of the mortgage the equity is about equal to the interest (more or less - sort of) and toward the end the payments are mostly applied to the principle so your equity increase more rapidly. |
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Marisa
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absolutely. usually at the beginning of your loan your payments will mostly pay down your interest. over time that will flip and you will pay more to principal then to interest. if you want to pay your principal down faster check to see if you have a prepayment penalty and for how long. don't pay more then allowed in your prepayment penalty for a given year and you will be fine. you could also check with your lender on making your payments bi-monthly or twice a month.....this may reduce your term by 5-7 years depending on your loan and you won't have to refinance. If you are a maverick with your money there are programs with built in algorithms for you to use to pay down your first and second together faster. It's a little complicated at first but supposedly proven. |
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