How it works (Example):
Let's say John Doe borrows $100,000 to buy a house. The interest rate is 4% with a 30-year principal.. His monthly payment is $477.42, which includes some interest and some
Why it Matters:
The half-life of any debt. In John's case, each payment includes interest and . In the early years of his , his payments are largely interest. As time passes, however, more of his payment is principal . Accordingly, the half-life is not 50% of the time involved, but 50% of the principal involved. that John's interest rate and loan length influence the half-life tremendously.