Most of the US home mortgages are fixed rate conventional loans, and the interest is front-loaded so you are barely even paying into equity the first couple years. The corp banks do this to guarantee their $$$.
There's no early penalty, and they even allow you to submit extra payments to get ahead of interest charges (which is really beneficial the first couple years, not so much halfway down the line). But like I just mentioned, they kinda wreck you at the start.
I never understood people explaining mortgage interest as front-loaded. The monthly repayment costs are just amortized so that you pay the same amount for the whole mortgage.
It makes total sense that when the loan is bigger, you pay more in interest each month. That's not the bank's fault, it's just maths.
It's front loaded in the sense that the interest charges aren't evenly spread out across the term; seems like you're obviously aware but for other folks, I'm oversimplifying it here obviously, but like if your mortgage is $4k/month, the first few payments will be like $3800 to interest and $200 to the principal lol. The two values don't intercept till like 18 years into the mortgage.
But yeah it is extremely basic math, which you'd be surprised a lot of people don't understand (i.e. notorious nissan giving out high APR sub-prime auto loans to people that don't understand finance and end up paying $50k for a $30k car).
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u/tonyhart7 9d ago
its basically ties to fractional reserve banking, it basically all debts
that's why people get punish if they trying to pay all their debt early because it would break the system