Hi I actually feel so stupid asking and I could provide more details if anyone is willing to help…
how do we get a 30 year loan and we are on year 16 and our balance has only decreased by a few thousand dollars. I know interest is paid first then principal but how on earth is 90% or more going to be paid at the end of the years remaining? Again, feeling very stupid. Ugh!
A good question, the bulk of the mortgage is interest, finance charges, and escrow ( if you have that), and principal balance in the beginning of the loan, that is true with any loan. These costs are all calculated on an amortization table, a breakdown of what you are paying and where it goes to-meaning what percents of your payments are distributed to interest, finance, and principal. The loaning institutions want the bulk of the money up front so that is why you are paying more to them (interest and finance charges) rather than principal. As time and payments continue this begins to reverse, so more will go to principal. To get around this, you would do yourself a favor if you paid down the principal by adding a money to principal only. That is just what we did, made the scheduled payments, but paid in addition on principal only, this is completely legal, just be sure your mortgage does not penalize for an early payoff. We took out a 30 year mortgage and paid it off in 11 years. Even if it is just $10 and you can pay on principal only, it is a good idea, it actually reduces the base of the loan, decreasing the actual amount of the loan. Oh, if you do decide to do this, make sure you have documentation of on principal only, I have had the experience with lending institutions where they take your addition monies and apply them just like an additional payment (interest, finance, and principal), I have had them reverse those transactions and redo it correctly. Best to you.
