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Great Economic News: Recession is Over!

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Joe Parsons

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Great Economic News: Recession is Over!

On 07 Sep 2003 01:33:50 GMT, (Gould 0738) wrote:

Just when it seems that you do indeed *have* a brain, you post something
like this. If a mortgage rate goes up from 5% to 6%, the monthly payment on
a 30 year mortgage goes up by a little under 12%...not 20%.

Sorry, but I'm not the one who needs to see the Wizard about a brain. When
money costs 6%, it *is* 120% as expensive as when it costs 5%.

"So, why doesn't the payment go up by 20?" inquires NOYB.

Good question, Doc. It's because your monthly payment includes principal as
well as interest, and the prinicpal portion of the payment doesn't increase,
only the interest.

Sorry, but it doesn't work quite that way. Loans are amortized by a fairly
complex equation, and your last statement is untrue. When the interest rate
changes for the same principal balance and term, both the interest and principal
components of the payment will change.

Joe Parsons

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