The Loan Amortization Schedule in Northern Virginia Has Completely Flipped to Buyer Benefit

by Tim Trainum

Fall in Rates Flip Loan Amortization Schedule to Advantage Borrower

Just two years ago, interest rates for a home mortgage were in the area of 4%. Today, rates are near 2.5% (40% less). This 40% fall has dramatic, second-level benefits to borrowers beyond just a reduced mortgage payment and increased home purchasing power. Enter the Loan Amortization Schedule. Every month when a borrower makes a mortgage payment, part of the payment is applied toward interest and part toward principal. That amount changes little by little with every payment - more and more going toward principal and less toward interest. In 2018 when rates were 4%, the first mortgage payment on a loan was comprised of 70% interest and only 30% principal. Today, with rates near 2.5% this is now a 50/50 outcome and completely changes the velocity at which a borrower builds equity in their home. First-level thinkers know interest rates are at all-time lows, but second-level thinkers know exactly what that means in terms of the financial impacts that can seriously help clients make the most informed decisions.

Top 5 Things About Current Interest Rates & Amortization Schedule

In 2018 at 4% interest, the first payment on a mortgage loan was comprised of a 70/30 split between interest/principal, but today's 2.5% rate produces a near 50/50 split at first payment.
A borrower's loan paydown of principal (equity build-up) is occurring 63% faster now than it did two years ago.
The borrower of a $500,000 30-year loan now pays $150,000 less interest over the life of the loan compared to 2018.
At 4% interest, it takes 14 years of mortgage payments (168 payments) before the 70/30 interest-principal split works its way to 50/50. With today's rates, the tipping point dramatically reduces to just 10 payments.
The "wealth accumulation effect" for homebuyers, investment property buyers (and re-finance borrowers) has improved considerably with far-reaching benefits to one's financial plan.

"My overarching objective is to be an advisor and value provider. I work to become the conduit of information to help consumers make the most informed decisions possible. I just happen to also have a real estate license." - Tim Trainum

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The Loan Amortization Schedule in Northern Virginia Has Completely Flipped to Buyer Benefit

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