Why aren't mortgage principal and interest payments equal throughout the loan? Why are they front-loaded with interest?
I just took out a $300,000 mortgage at 3.25% for 30 years.
Over the life of the loan, I'll pay 470k total, 170k in interest and 300k in principal.
Why doesn't the bank take the 170k interest, divide by 360 months (the life of the loan), and charge me that amount equally for the entire loan?
Edit. I KNOW how the current system works. I don't need an explanation of that. I am asking WHY banks don't take the total cost and divide it by 360 (to get an even interest and principal each month). The total payment amount will be the same each month but so will the amount to interest and principal.
If I lend you $100 and tell you the repayment is $120 after a year, it's easier if you just give me $10/month for the year rather than have me calculate each month separately. Why don't banks do this?