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ApprehensiveSorbet76 t1_irg3rqv wrote

This is great! iso-affordability lines.Another interesting topic includes the change in amortization schedule. The higher the interest rate, the more front-loaded the interest payments become. So the rate of equity building of the borrower also slows down. This has a huge impact on people who do not stay in their homes for very long. It also makes it much easier for someone with a high interest mortgage to find themselves underwater in a market downturn.

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hmiamid OP t1_irhuiwy wrote

Which happened in 2008 with adjustable rate mortgages. In the UK, practically every mortgage is variable rate.

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ApprehensiveSorbet76 t1_irj289k wrote

That is also true, but I was referring to, for a given monthly payment, the ratio of that payment that goes to interest vs principle. As a fraction, the lower the interest rate, the more of every payment goes to principle. For the very high 10% and above rates, principle might only be 20 bucks a month vs 980 paid to interest. For the very low interest rates, nearly 50% might go to principle and 50% to interest. For all cases, payment 360, the last one, will be mostly principle. So maybe it’s $980 principle and $20 interest.

This dynamic significantly affects loans that are not kept to maturity.

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