Mortgage question-why so high?

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A 7% mortgage will cost you 14000 per year in interest alone, which definitely will be over 1100 dollars, even before you pay one penny in reducing the principle. A 5% mortgage will cost 10000 per year, sets you back 833/month before you pay any principle.

The way to cut the payment is first to buy at a lower purchase price, secondly to cut the interest rate... which may involve taking the risk of a variable rate mortgage.

We almost always see lower overall mortgage interest cost on variable rate mortgages. And even when we pay the extra interest to go fixed rate, we may have to renew our mortgage at a time when fixed rates are very high. So fixed rates too present the same risk.

If you see variable rates much below fixed rates it is because investors do not want to lock in their money long term... they are expecting a significant increase in interest rates.

By contrast, if variable rate mortgages are as high as fixed rate mortgages, people are betting that interest rates will go down. In this case you do not want to lock into fixed high interest rates long term.

Mortgage question-why so high?

At 0% interest, you could pay off $200,000 over 30 years with only $555.56 per month. But no one is going to give you free money. Modern mortgages came about in order to allow you to not have to make larger payments at the beginning of the loan. If you didn't amortize, the first month you'd pay $1,430.56 ($875 in interest (5.25% x $200,000/12) plus $555.56 principal payment), with monthly payments gradually diminishing as the loan was paid off until your last payment was only $557.98 total (only $2.42 interest).

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Mortgage question-why so high?

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