by Tom Streissguth
How much you'll pay the bank each month depends on several factors.
The principal amount that will be repaid is the total amount of the loan, net of interest and all other charges. You can lower the principal amount by making a down payment. Lenders typically ask for a down payment of 20 percent of the purchase price, though terms vary from one lender and loan type to the next. At the start of the loan, the principal amount you are repaying each month is small. As the loan principal amount falls, the interest charges also are reduced, and the percentage of monthly payment that goes toward principal increases.
You will be paying mostly interest at the start of the loan. Interest can be fixed or adjustable. Some loans allow the payment of interest only at the beginning of the loan, with a balloon payment
due at the end of their term. As the loan ages, the interest charged on the outstanding balance falls, and interest represents a small percentage of the total payment. Interest charged on mortgage loans is tax-deductible -- one of the many tax advantages of owning rather than renting your living space.
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