Originally Posted by Weaselboy
I'm not sure where you get this 70% number from, but it is nowhere near accurate. There is a certain amount of "frontloading" of interest due to the way interest is calculated on the outstanding balance, but it comes out nothing close to 70%... unless I'm missing something you are trying to explain.
Take a $50,000 five year loan at 4%. The first year is $9,218 towards loan principle, and $1,832 in interest. Or about 35% of the total $5,250 in interest for five years. So even in year one you are paying back far more toward principle than in interest.
There is a very linear drop in interest payments each month with a corresponding linear increase in principle payments. In this example about $3.00 a month difference on both sides of the equation.
