Interest & Amortization

Where the money goes in year one against year twenty.

3 articles

• Total Interest Paid Over 30 Years: $510,178 on a $400K Loan at 6.5%

  On a $400,000 loan at 6.5%, the interest exceeds the amount borrowed. The reason sits in the first payment, where fourteen cents of every dollar touches the debt.

• The Interest Rate Sets the Payment. The APR Tells You What It Cost.

  Your monthly payment is calculated from the interest rate. The APR exists so you can compare two offers whose fees differ.

• Your First Payment Is Mostly Interest, and That Is Arithmetic

  On a 30-year loan at 6.5%, the first payment is about 79% interest. Nothing is being taken from you — the interest is simply charged on a balance that has not fallen yet.