If a loan is paid off earlier, is the interest recalculated for the time of the loan life?

sinchec_blue asked:


During the first years of the loan, the biggest part of monthly paiments go toward the interest which is calculated for the full live (30 years) of the loan. If the loan is paid off (refinanced) after 3 years, is the interest recalculated for the 3 years only and the over paid money go toward the principal or the money paid for the interest are “lost” for the borrower?

Tiffany

Tags: First Years, Lost, Principal

This entry was posted on Wednesday, July 15th, 2009 at 2:12 am and is filed under Refinance. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.

2 Responses to “If a loan is paid off earlier, is the interest recalculated for the time of the loan life?”

1. ckm1956 Says:
   July 18th, 2009 at 1:11 am

   Mike

   It’s lost. The interest you paid was for the “privilege” of having the money from the lender.

2. spanish butterfly Says:
   July 20th, 2009 at 3:03 am

   Jon

   interest is calculated on the balance up to the time you pay it off. It is based on the interest rate of your loan and the total principal balance at that time. They don’t recalculate interest to make more from you. All the other interest you paid belongs to the lender you won’t get that back. The best part of paying off a loan early is that you do avoid paying additional interest for the entire life of the loan.. only the interest you owed upto the time you pay it off….