Hi, I was reading Brandon Turner's Rental Property Investing book, and he was talking about principal and interest mortgages. It made perfect sense to me until the part where the amount of interest and principal changes. I just want to know if the first month let's say the monthly payment is $500 and I put $400 of in interest (My profit) and only $100 of it for the principal (the loan payment) don't I still have to pay $500 a month? How do I exactly profit from it?
@Parsa Izadpanah I'm not sure that I follow exactly, but principal paydown is part of your profit. It's just being held as equity in your home, so it's not cash flow you can spend.
Hi @Dawn Brenengen I'm very new to this. I'm a bit confused on the part where the principal amount and interest amount changes overtime. How does that affect my profit exactly?
As you pay off more of the house, the amount of interest that is part of the payment goes down, and more of the payment is principal. For instance, a $1000 payment at the start of a loan might be 100 principal and 900 interest, but the last month of payments, 30 years later, would still be $1000 but it would be almost all principal with just a few dollars of interest