If you’ve ever had a 30-year mortgage, you may remember the feeling of opening your first bill.
We had a relatively low interest rate historically at 6% though that seems ridiculously high in this age of low interest rates.
During your first year on a 30 year fixed mortgage, nearly 70% of your mortgage payment of $477 will go to interest alone.
While it feels like interest is reverse compounding when nearly 70 percent of your payments are going toward interest in year one.
A mortgage is simple interest usually calculated monthly. For example, the table below shows that interest is based on a simple balance calculation.
Over the past several years, mortgage tenure has increased from about six years to 10 years.
First, interest rates are usually nearly a whole percentage point lower on a 15 year fixed mortgage than a 30 year fixed mortgage (it’s been closer to .75% recently).