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Will I annually have to pay the full interest on a loan?

If I get a refi with cash out on my home for $50,000 and my APR is 5%, do I pay have to pay the full interest on the loan every year for the life of the loan? Meaning, will I have to pay $2,500 a year on interest?

Debt, Real Estate
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June 2017

The answer is no.  All loans are amortized.  The payments in the early months are almost all interest, and in the final months are almost all principal.  That is so the banks make money if you pay off your loan early; you have already paid most of the interest so they come out way ahead.  Look at your full statement which by federal law must list the amount of principal and interest each month of the loan.  Notice how the interest keeps dropping each month, and the principal payment keeps rising.

That way, if people buy a house with a 30-year mortgage and they leave after 5 or 10 years, they have hardly paid off any of the principal.

The banks always win.

June 2017
May 2017