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I plan on buying a house soon…
Im totally confised as to how the interest works out..
For example lets just hypothetically say// I borrow 100,000 with a 7% interest rate for 30 years.
Does that mean i will be paying 7,000 in interest per year?
How do you calculate that?
Would that mean i pay 352,000 over the course of the loan?

3 Thoughts on Interest & Mortgages.. Do you pay the percentage of interest yearly.. See more?
  1. Reply
    rtfm
    March 26, 2013 at 10:48 pm

    You pay the interest only on the remaining principal. After the first year, you would no longer owe the whole $ 100,000, so the amount of interest you pay would be less the second year, meaning the amount of your payment that’s applied to the principal would be more, meaning that the principal would go down faster, meaning that during the third year, you’d be paying even less interest, and more toward the principal … and so on. Every year of the mortgage, you pay less toward the interest and more toward the principal.

    Google “mortgage calculator” and you’ll find many sites that will give you a year-by-year breakdown of what you’re paying toward the principal each year, as well as a total of what the entire loan will cost you by the end of the 30 years.

  2. Reply
    bud68
    March 26, 2013 at 11:39 pm

    No – the amount of interest you pay per year declines as the principle balance declines. Google “declining balance loan” for info.

  3. Reply
    karavaara
    March 26, 2013 at 11:47 pm

    If you have to deal with a mortgage loan, then you should use the services of a free mortgage loan calculator. That is because they have many different uses and functions designed to help you handle the different aspects of calculating a mortgage loan.
    Read more here:
    http://wwwmortgage.blogspot.com/2008/06/many-uses-of-free-mortgage-loan.html

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