SL 3: More Interest Than Principal Being Paid
long amortization terms will have you pay more interest than principal
The Amount of Interest Paid Over the Term of the Loan is Very High
As illustrated below, you can see the total amount of interest and principal paid over the 30-year term at 6% for a $100,000 mortgage loan:
Total Payments $215,838.19 Total Interest Paid $115,838.19 Total Principal Paid $100,000.00 The borrower paid the lender more in interest than the amount that was borrowed.
| Month | Starting Balance | Monthly Payment | Interest Paid | Principal Paid | Ending Balance |
| 1 | $100,000.00 | $599.55 | $500.00 | $99.55 | $99,900.45 |
| 2 | 99,900.45 | 599.55 | 499.50 | 100.05 | 99,800.40 |
| 3 | 99,800.40 | 599.55 | 499.00 | 100.55 | 99,699.85 |
| 4 | 99,699.85 | 599.55 | 498.50 | 101.05 | 99,598.80 |
| 357 | 2,368.52 | 599.55 | 11.84 | 587.71 | 1,780.81 |
| 358 | 1,780.81 | 599.55 | 8.90 | 590.65 | 1,190.17 |
| 359 | 1,190.17 | 599.55 | 5.95 | 593.60 | 596.57 |
| 360 | 596.57 | 599.95 | 2.98 | 596.57 | -0- |
| Total: | $215,838 | $115,838 | $100,000 | ||
Now imagine the accumulated interest payments paid for a $200,000 mortgage at 6% - 30 year term:
Total Payments $431,676.38 Total Interest Paid $231,676.38 Total Principal Paid $200,000.00 What about a $400,000 mortgage:
Total Payments $863,352.76 Total Interest Paid $463,352.76 Total Principal Paid $400,000.00 Download this spreadsheet to run your own numbers.
Scroll down the spreadsheet to see the accumulated interest paid over the life of your loan.
