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View Diary: What President Obama can do for the economy without Congress: Mass mortgage refinancing (93 comments)

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  •  I disagree... (2+ / 0-)
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    KenBee, tardis10

    The compounded interest is what's making the mortgage payments so high and making people need 30 years to pay them off. A 200K mortgage, after paying it off with interest, runs you on average 400 - 450K, principle plus interest. Plus over the early years the vast majority of your payment goes to paying interest with very little applying to principle. (This has the side effect of pushign people underwater more quickly.) At 20% simple, a $200K mortgage would cost $240K total when it's all paid off, and every payment made would apply 80% to principle, 20% to interest thus increasing equity much faster.

    •  It is all the same, do the math. (0+ / 0-)

      All you are doing is specifying a particularly low compound yearly rate, and then doing the math to convert it to simple interest.  The math is somewhat hairy because of the constantly changing balance, but it is possible to figure out the yearly rate that is equivalent to your 20% simple interest.  Therefore, the question is whether anyone would lend at your particularly low interest rate?

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