Introduction to mortgage payments. |
Let's take a look at the transfers that can occur in the financing of our house. One thing you will notice is that the house on the right is larger than the one on the left. The one on the left represents the house you live in. The one on the right is the one the lending institution is building with the interest they charged you to build yours. Obviously one way to reduce the size of the house we build for the bank is to put more money down on the principal or to accelerate our principal payments. As we will see, both of these decisions may result in unnecessary wealth transfers. |
No math presented on this screen. |