sidjun

Most of the time, the total interest paid is included in the amortization plan. It's also easy to figure out. Using my example, the exact payment was $536.82.

$536.82x12x30=$193,255.20 Total($193,255.20)-Principal($100,000)=TotalInterest($93,255.20) give or take a dollar.

And so according to your desire, you'd want them to say it is a 93% mortgage.

The reason they don't is that interest rates and compounding are typically done annually. You also have the ability to make extra payments sometimes, which can pay it down faster. The faster you pay the debt, the less interest you pay.

For instance, if you win the lotto, receive a life insurance payout, or inheritance, etc and pay off the loan within the first year, it's no longer a 93% mortgage but a 5% one.

To me, it makes more sense to say, you owe $100,000 your first year, or $98,398 your second year, and that you'll be paying 5% interest over that year.

Let's break this down with a simple example: You get a 30yr mortgage for $100,000 at 5%

If you paid $0 on principal your first year, the interest would be $100,000x0.05=$5000

Make it monthly: $5000/12=$416.67 rounded up to $417

On an amortization schedule, the fixed payment is calculated at $537, with $120 going to principal and $417 going to interest on your first payment. Exactly what you would expect to pay. The interest isn't front loaded, it's just the actual accrued interest of what you have borrowed.

When you pay the $120 in principal on your first payment, your debt reduces to $99,880. $99,880x0.05/12=$416 rounded. Therefore, your next payment, still at the fixed rate of $537 is now paying $121 in principal, and $416 in interest.

In short, when you have a large debt, you pay larger interest, when you have a smaller debt, you pay smaller interest. This isn't exploitation, just mathematics.