Let’s say I borrow 100.000US$ from a bank to buy a new house, finance it for 240 months (20years), and put that house on a mortgage. Can the total amount of money paid be 300.000US$ or more? I mean isn’t that excessive?
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Thats about what it will total out too. Depends upon the interest rate charged and the term of the loan.
Is it too much? If it is, then don’t borrow the money!
Money has a time value. In fact, mortgage lending is amongst the lower returns one can receive for it. If I have some money to loan, I can lend it to you for your mortgage, or use it to buy a business, say like an oil company or a restaurant. The mortgage is less risky, so I’ll charge you a lower rate than if I invest in a restaurant for example.
No one in this world is supposed to take care of you but you yourself.
Astrobuf
Yes, it can certainly exceed the original amount by that much. It’s usually not that much, but if this is happening, here’s why:
(1) You are using a fixed rate, probably keyed to an IBR (Internal Board Rate) instead of SOR (Swap Offer Rate). This is also known as “the sucker’s deal”. Everyone on a floating rate will pay far less than you.
(2) You do not know or understand how to refinance your mortgage. Rather than switch to a cheaper loan after your current deal goes sour, you stick with the same bank for all 20 years. Or you’ve let your banker conceal options for repricing (you may actually have one repricing for free).
(3) You are intending to rely on cash-out refinancing to generate money from your mortgage, in which case you don’t care that it’s 300 % more, because you’re making more money than the interest.
You sound like you’re being played by your banker. Visit this blog for more details:
http://www.moneysmart.sg/home-loans/fixed-vs-float…
Source(s): Work with 12 banks, but not a banker!
Absolutely it can be that much because you have count repaying the principle (the original amount you borrowed) plus you have to pay the interest which if you’re borrowing 100000 is at approximately 5.65% to get to 300000 in 20 years and that’s with no annual addition, no down payment, and no “points” on a fixed loan. If you can find 20/1 ARM loan it would probably be significantly cheaper.
Time is money. But to pay $300K on a 20 year loan would require an interest rate of 14-15%. Those pretty much ended circa 1982.
Yes
That’s definitely too much