6/4 Loan experts. What are the difference between the two scenarios?
1. borrow 100k at 6% for 30 years, pay off 50k immediately
2. borrow 50k at 6% for 30 years.
According to my loan program, I pay quite bit more in 1. but
shouldn't the two be the same? ie, in 1, the interest also
starts pretty much with 50k principle.. what causes the
difference? Thanks.
\_ Your 50k must be 50k of the principle--that is 50k + 1st month
interest + same principle as loan 2.
\_ As above says, but also make sure your loan doesn't have any
pre-payment penalties and as they say make sure your 50k is going
to principle, not interest. Then it becomes the same. Almost.
You'll end up paying a few days interest on that 50k.
\_ If this is a mortgage - like loan, some have origination
"points" or fee structures based on the principal amount.
nitpick: principal not principle. |