Board 8 > What's the justification for paying (Mortgage) interest up front?

(+) Yeah! (+)

Especially with a VA loan where they know an Active Duty person (my wife) could be forced to move away and we'd have to sell it, it's literally taking money out of my pocket for when I have to.

It sucks ass to login to your mortgage account and see how little I've paid off in 4 years, lol.

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Not sure what you mean? The mortgage accrues interest on a constant basis. At the beginning, the loan amount is higher so you pay more interest. As you pay down the loan, there is a lower balance and therefore less interest to pay.

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I think he is eschewing the proto-Judean virtue of not charging interest on a loan

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Bartzyx posted...

Not sure what you mean? The mortgage accrues interest on a constant basis. At the beginning, the loan amount is higher so you pay more interest. As you pay down the loan, there is a lower balance and therefore less interest to pay.

I guess I'm asking why interest is calculated/charged in a way that for the first however many years, you're literally paying more interest than principal? It's basically a straight-up scam.

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It's the result of amortizing the loan over a period of 30 years. In order to make the payments the same every month, you will not have much money left to pay principal at first.

If you want to pay more principal than interest from the start, you would have to reduce the term of the loan to less than 15 years (depending on the interest rate, more or less), which is not a financially feasible solution for most borrowers. Especially on a VA loan which may not require a down payment.

Remember, you borrowed tens (or hundreds) of thousands of dollars. Interest is going to be a bitch.

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By the way, if you think that's a scam, there are literally mortgages where you only pay the interest for the first several years. In that case, you would still have the same principal amount as you did when you started.

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it's because you can't afford to pay more principal. it's kind of just how the math works - the more you owe, the more interest you pay. if you pay the same amount of P+I, then your principal will be lower earlier on.
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It isn't just the interest that is the shitty part. It's the taxes and required homeowners insurance too. I think my mortgage when I first got it was like 25% principal / 38% taxes + insurance / 37% interest. It's only become more skewed towards taxes and insurance now that I've gotten a lower interest rate too

Are your interest payments significantly higher than the interest you owed those years?

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