# About the banks loans

1 Reply

Hello everyone. I have read The Book on Rental Property Investing and I have a question about the loans.

If I want to buy a property (with price of 100k for example) and I paid 20% down on the Bank( they will loan 80k to me, right?).

I want this loan to be for 30 years, and now is the main reason I write this post, this 80k loan at an interest of 4.5% in 30 years will become 143k approximately (~400 dollars month mortgage payment). So where will be my profit? if I want to make this deal for renting that property, let's say after all the taxes and mortgages I have 100 dollars cashflow.

And another question, for making sure You will know what I mean with this post. What If after 2 year I will decide to sell this House for 110k, the total Loan/Mortgage is 143k(after 2 years will remain 133k). 110000-133000= -23000 (this is not sound like profit..)

(btw sorry for my English, I just want some more information about the paying the loan/mortgage and give me some detailed explanation to understand better, maybe I forget something.)

Thanks you, all!

You are correct on the loan amount. If you buy a property for 100k with 20k down, the bank will loan you 80k.

You are also correct about the total amount after 30 years being around 143k.

However, that's not exactly how loans work. The interest rate is applied to the remaining principal balance. So starting out your principle balance is 80k (the amount you borrowed). As you pay down the balance through your monthly payments, the interest payments will also decrease.

At any point in the life of the loan you can pay it off for only the remaining principle balance amount (assuming no pre-payment penalty).

Search online for a mortgage calculator with the option to view either a monthly or yearly amortization schedule and you will see what I mean.