Jenab
January 19th, 2006, 10:52 AM
Just to see what would happen, I clicked on an advertisement offering a $160,000 mortgage for a repayment plan of "only" $717 per month.
Here's what I found out.
Lenders in our network offer loans with the following terms:
$100,000 loan: $479 a month (APR 6.678%)
$125,000 loan: $573 a month (APR 6.621%)
$150,000 loan: $688 a month (APR 6.621%)
$160,000 loan: $717 a month (APR 6.593%)
$170,000 loan: $762 a month (APR 6.593%)
Let's consider the $160,000 loan, since that's the one that was advertised.
At an Annual Percentage Rate of 6.593%, assuming it is compounded annually (which is probably an optimistic assumption), an amount of interest equal to $10548.80 will be added to the borrower's debt after one year. Over that same period, the borrower will have made 12 payments of $717 each, for a total of $8604.00.
The payments will fall short of paying the interest by $1944.80 during the first year, and things will only get worse from there on.
What's going on with that?
Jerry Abbott
Here's what I found out.
Lenders in our network offer loans with the following terms:
$100,000 loan: $479 a month (APR 6.678%)
$125,000 loan: $573 a month (APR 6.621%)
$150,000 loan: $688 a month (APR 6.621%)
$160,000 loan: $717 a month (APR 6.593%)
$170,000 loan: $762 a month (APR 6.593%)
Let's consider the $160,000 loan, since that's the one that was advertised.
At an Annual Percentage Rate of 6.593%, assuming it is compounded annually (which is probably an optimistic assumption), an amount of interest equal to $10548.80 will be added to the borrower's debt after one year. Over that same period, the borrower will have made 12 payments of $717 each, for a total of $8604.00.
The payments will fall short of paying the interest by $1944.80 during the first year, and things will only get worse from there on.
What's going on with that?
Jerry Abbott