An enormous chunk of your mortgage can be composed of the interest you’re paying on the loan, so people are naturally interested in the interest. The mortgage can be roughly broken down into two components. The first is the principle; the principle is the amount of the loan. For example, if the loan is for $100,000, that one hundred grand is the principle—the actual amount. But you have to take the loan out at a certain interest rate, and for a certain amount of time. So if you take out that $100,000 loan for a 30-year mortgage at an interest rate of five percent, by the time you pay off the mortgage, you have spent $150,000 dollars in interest. That information doesn’t come up front, which is why you need to use an interest only calculator to figure out what you’ll be paying on a mortgage.
Paying Is Principle
When a mortgage is created, it’s “stacked” so that at the beginning of the life of the mortgage, most of the money you pay goes to the interest generated by the duration of the mortgage. Though the method is essentially invisible to the buyer, the fact is that a buyer is mostly paying off the interest generated by the loan. As the years go on, more and more of the principle is paid off. An interest only calculator is an invaluable tool to the consumer in determining whether they should get a loan, and how to most effectively purchase a mortgage. Interest only calculators can be found online, and can be used for free, usually as a component in the website of a mortgage company or a bank. Interest only calculators will help you determine if you want to get into an adjustable or fixed-rate mortgage, and it’s always best to know what you’re getting into before signing with a mortgage.
Leave a Reply