I have a few detailed questions about paying off a mortgage:As far as I can tell, when you get a mortgage, you get a scheduledetailing, month by month, how much of your standard payment goesto principal and how much goes to interest. This schedule isfront-loaded so the first payment is all to interest and the last payment is all to principal. So, while mortgages are quoted as havinga particular interest rate, what you actually commit to is to payX dollars per month over Y months, where X*Y equals to (mortgage amount) * compounded interest over the term of the loan.(Assume a fixed-rate mortgage)So, unlike a credit card, where you have interest computed on a runningbalance, with a mortgage you have committed to pay a certainprincipal and a certain amount of interest if you pay to term.Question 1: Is the above true, or am I full of it :)Question 2: If the above is true, if you prepay a mortgage BUT intendto sell the property before you could pay it off anyway, you are goingto save zero actual interest (and have realized a zero actual returnon your money), since the interest paid off is according to the paymentschedule. The question is: is this true?I sometimes see TMF posters saying that paying down a mortgage earlyis like an interest rate boost equal to the rate of the mortgage.If Question 2's answer is Yes, then they are wrong unless you completely pay off the mortgage. Also, the "older" your mortgage, the less interest you will save by paying down since the principal/interestpayoff schedule is front-loaded. (I guess the key question here is does incremental payments to principal affect the interest side of thepayment schedule, or is the interest side graven in stone until theprincipal reaches zero?Take an extreme example. Suppose you have a $100K mortgage at suchan (awful) interest rate that you are paying $1000/month, with a tabledescribed above. You make a payment of $100,999 in the first month, reducing principal to $1 in the second month. In the second month,do you owe (about) $1001 to pay off, or do you owe $1 + a few cents?Question 3: Why do mortgage providers actually want you to pay downearly? If Question 1 is true, it makes sense - they get basicallyfree money and cash flow from what I suspect is the vast majority of their mortgages, which are paid off when houses are sold - whilestill getting all of the interest.Thanks.
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