Mortgage question-why so high?
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A fully amortized home loan allows you to make the same payment every month and pay the whole thing off within the loan term. At the beginning of the term, the payment is mostly interest, but as time goes by more and more of it goes toward paying down principal.
On a $200,000 loan, on a 30-year loan with a fixed 5.25% rate, the payment would be $1,104.41. On the first month's payment, $875 of that goes toward interest (5.25%/12 x $200,000) and only $229.41 goes paying down the principal from $200,000 to $199,770.59. The next month the payment is the same, but $874 goes toward interest (6%/12 x $199,770.59) and $230.41 goes toward paying down the principal. By the last payment, only $4.80 is going toward interest.
Yes, you end up paying almost as much in interest over the life of the loan as you pay in principal ($197,585 in interest total over the life of the loan plus $200,000 in principal). But the alternative would be to require you to first save up the $200,000 before you buy the house - and no one wants to wait that much of their life before they can start living in a house.
Historically, 5.25% is a very low rate - about as low as you could expect in your lifetime. It may be hard now, but even if your income only increases 3% per year, after a while it won't seem like such a large payment. I know it can seem daunting - but I'm supporting my family with a house payment in San Diego and I wish I had such a low payment. Good luck to you.
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