At the start of the mortgage most cash goes to interest

Q: A year ago, we took out a mortgage for $165,000 when we bought our house. Not counting what goes to escrow to pay our property taxes and insurance, we send $836 every month for principal and interest payments. That’s about $10,000 a year.

I just got a monthly statement that says we still owe $162,338 — that’s a little less than $2,670 off our loan after a whole year. It looks like they only take about $221 a month off the debt. I figured we’d still owe $79,858 after 30 years, but we’re supposed to have paid it all off at that time.

Something is wrong here. Should we see a lawyer, or is there a government agency I can contact to get this straightened out? — P. I.

A: Everything is how it should be, and you’ll be free and clear as scheduled 29 years from now.

They’re not crediting $221 a month toward reducing your debt. The amount changes every month, and I’m happy to say it increases a bit every time. Here’s how it works:

The first month, you were borrowing the whole $165,000. It looks like you’re paying 4.5 percent interest, which would have totaled $7,425 in interest for the first year. But the interest you owed the first month was one-twelfth of $7,425, around $619. The rest of your payment, about $217, went to reduce the total debt.

So, the second month, your total loan amount was $164,783. The interest payment for that month was, therefore, $1 less than the last, in turn leaving $1 dollar to whittle down your total debt.

At the beginning of your mortgage, most of your payment does go toward the interest. But later on, you’ll owe much less interest per month, and the total debt will decrease rapidly.

Will changing the brokers help?

Q: My parents’ house has not sold after being on the market for over 260 days. This week was the end of the contract, and I took it off the market. Several real estate agents called me the next day, telling me that they would like to sell the property. I have appointments set up with them next Monday. But there are a few things I’m considering, and I’d like your advice.

I was thinking of writing a thank-you note to the previous agent for the time and effort he spent marketing of the house. But is he owed anything more, such as any financial compensation? He hasn’t asked for it.

What questions and bases should I cover while asking the other agents about what they would do differently? I think a more aggressive marketing approach is needed to help buyers pay more attention to the house’s attributes, rather than its deficiencies. — L. A.

A: I haven’t seen the listing contract you signed, but it probably says that the agent would be paid a commission when the house was sold — but it wasn’t. You don’t owe him anything. A thank-you note for his time, effort and any expenses he covered would be welcome.

Did he ever recommend that you drop your asking price? If not, you were poorly served and you’re justified to change brokers. Buyers have had plenty of time to see that your parents’ house is overpriced. If it remained unsold for the better part of a year, then no matter what the problem, a price cut would’ve solved the problem. Relisting the house with a different agent for the same amount isn’t likely to help. No agent can grab buyers by the hair and make them look at an overpriced property.

So yes, by all means, send that agent a thank-you note. But if he did suggest lowering your price, it would be even better to follow his recommendation and give him another chance to market the property.

Edith Lank will respond personally to any question sent to www.askedith.com or to 240 Hemingway Drive, Rochester NY 14620.