Pay off mortgage?

swimcatsmom
Sat, 24 Jan 2009 01:55:11 +0000

You do not prepay interest on a mortgage at all. You are paying more interest at the beginning of the mortgage term because you owe more money on the principal of the loan at the beginning so of course the interest is going to be higher. For instance in the example on your link the 1st year the loan start off at $100,000. the mortgage is held for 11 months of 2009 - 11 months interest on $100,000 is @$6,390. So at the end of 11 months you have made $7318 in payments - $6390 have gone to interest that you owe for the year, so only $928 goes to the principal. This is because you owed interest on $100k the 1st year - not because you are paying interest in advance. In the 2nd year you start off owing a little less, $99,072 (the original $100,000 less the $928 principal you paid in year 1). So your interest for year 2 is 7% of what you owe - $99,072 - @$6970. So in year 2 a little less of your mortgage payment goes toward the interest, because you *owe *less interest, and a little more to the principal.

There is no prepaid interest being charged. Just interest each year on the amount of money you still owe. All amortization tables do is calculate a way of paying the mortgage off in equal installments over a period of years.