This Is How Interest Is Keeping You From Building Wealth

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[rmidifferent]

That's why paying more early is such a good thing. If you pay 500 bucks during those first few month you just made > 2 months of progress

[unforgiven]

Guess what. When you rent, 0% goes to the principal and 100% to someone else. Also your mortgage interest rate might be 4% and real-estate can grow at 8% a year. Buy what you can afford is the actual lesson

[TheCrow]

Thats why if you can afford it just put an extra 50 dollars on each payment. Thats more than doubling the amount of principal you are taking out at the beginning.

[vitaluka]

Crazy that I'm going to have an apartment for $400k but will be worth more like $550k once fully built and only pay $2000 a month. But the interest rate is 5% for 5 years

[johnc]

Easy math.
$300k mortgage. Assuming 30 years.
Payment of $2k/month.

$2k/month × 12 months/year × 30 years = $720k.

Basically, your $300k loan cost you $420k in interest to the bank.

[thyb]

Throw dumps on ur mortgage when you have extra money 100$ 1000$ 10000$, throw it on there

[toddyoung]

You mean vs rent where 100% of the payment is effectively interest. So worse case scenario you have a home and each month you increase your networth by $250, which increases monthly over the life of the loan. Yeah such a bad deal you win the investor getting the interest wins. Oh no 😂😂😂😂😂

[KyleDenney-fxux]

Ummm $2000 a month and $250 goes towards principle. But $1750 is not what goes to the bank. Some of that is escrow. Poor example and poor math. It's not "all interest baby..." but yes paying off more is better. Just a lie on the math.

[anastasiawortham]

This is why my husband and I budget on one income and use the other to save and invest. Social Security is just theft at this point so we have to nest egg for our selves and our kids.

[DeLaCruz]

That is unfair. They say it's a 7% or 3% interest loan, but they put it all on the front end. So they get all the profit and it's barely paid down the principle. You're home, that's wrong, that's
Unfair. Someone say that's a dirty pool

[debbiejones]

I think it is misleading to say “you pay more interest up front”. You pay more in interest CHARGES because the interest is calculated monthly based on the principal balance on the loan. Every month that you make a payment, the interest is a little less because the principal is a little less. I’m not sure everyone quite understands this concept.

[kjc]

This doesn’t sound right. Yes I paid more interest first but it wasn’t that high.

[roeimessica]

That’s not that insane you bought a house with the banks money if you don’t want to do so buy it with your own money if that’s not possible then rent it

[KyleB]

So instead you should rent where you're paying the same amount of money, but none of it is going towards an asset that is yours. Is that what's being suggested here? If you think 90% of your payment going to the bank is bad wait until 100% of your payment goes to someone else.

[mrothman]

You've conveniently omitted any mention of the income tax benefit of paying interest. So, part of that $1, 750 is actually a reduction (equals a prepayment) of your income tax liability. Yes, you're still paying interest, but's it's not as draconion as you portray it. When you omit the obvious, the impact of your conclusion is diminished. You can do better.