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Why the interest on a loan is a business expense and a tax deduction but the principal payments are neither?
Because the princial payments are your simply returning the money you borrowed. WHEN YOU BORROWED THE MONEY, IT WAS NOT TAXABLE INCOME, RETURNING IT THEN CANNOT BE TAX DEDUCTIBLE. (Or every year I would borrow an amount say equal to my taxable income from all sources from someone/thing (bank, brother, friend who I lend the same amount to at the same time), and pay it back the next day...creating a deduction, and eliminate all my taxable income from all other sources).
What else can I help you with?
Do principal payments reduce interest on a loan?
Principal payments do not directly reduce interest on a loan, but they can indirectly lower the amount of interest paid over time by decreasing the outstanding balance on which interest is calculated.
How do you calculate the principal and interest payment for a loan?
To calculate the principal and interest payment for a loan, you can use the formula: Payment Principal x (Interest Rate / 12) / (1 - (1 Interest Rate / 12)(-Number of Payments)). This formula takes into account the loan amount (principal), the interest rate, and the number of payments.
What does the mortgage interest principal graph show in terms of the breakdown of payments over time?
The mortgage interest principal graph shows how the payments on a mortgage are divided between paying off the interest and the principal amount of the loan over time.
Do large principal payments reduce monthly payments?
Large principal payments do not reduce monthly payments. Monthly payments are typically fixed based on the loan amount and interest rate, so making a large principal payment will not change the monthly payment amount. However, paying off a large portion of the principal can help reduce the total interest paid over the life of the loan and shorten the loan term.
Why is my interest higher than my principal in my loan payments?
Your interest is higher than your principal in your loan payments because the interest is calculated as a percentage of the remaining balance of the loan. In the beginning, the balance is higher, so the interest amount is also higher. As you make payments, the balance decreases, resulting in less interest being charged over time.
Do principal payments reduce interest on a loan?
Principal payments do not directly reduce interest on a loan, but they can indirectly lower the amount of interest paid over time by decreasing the outstanding balance on which interest is calculated.
How do you calculate the principal and interest payment for a loan?
To calculate the principal and interest payment for a loan, you can use the formula: Payment Principal x (Interest Rate / 12) / (1 - (1 Interest Rate / 12)(-Number of Payments)). This formula takes into account the loan amount (principal), the interest rate, and the number of payments.
What does the mortgage interest principal graph show in terms of the breakdown of payments over time?
The mortgage interest principal graph shows how the payments on a mortgage are divided between paying off the interest and the principal amount of the loan over time.
If a Cosigner pays all of the the Home Equity Loan monthly payments does the Primary Signatory then get to claim the tax deduction on the interest paid or does the Cosignatory get such tax deduction?
You cannot claim a deduction for something you did not pay. If the primary signatory did not pay the interest, then this person does not get to deduct it. In order to claim a non-business/non-investment deduction for interest, the person claiming the deduction must (among other things) be the legal or equitable owner of the property. Usually, the cosignor is not the legal or equitable owner of the property, hence the cosignor cannot claim an interest deduction.
Why is my interest higher than my principal in my loan payments?
Your interest is higher than your principal in your loan payments because the interest is calculated as a percentage of the remaining balance of the loan. In the beginning, the balance is higher, so the interest amount is also higher. As you make payments, the balance decreases, resulting in less interest being charged over time.
Do large principal payments reduce monthly payments?
Large principal payments do not reduce monthly payments. Monthly payments are typically fixed based on the loan amount and interest rate, so making a large principal payment will not change the monthly payment amount. However, paying off a large portion of the principal can help reduce the total interest paid over the life of the loan and shorten the loan term.
Why is my interest payment higher than my principal payment?
Your interest payment may be higher than your principal payment because the interest is calculated based on the remaining balance of the loan, which is typically higher at the beginning of the loan term. As you make payments, the principal balance decreases, resulting in lower interest payments over time.
What are the differences between an interest-only loan and an amortized loan?
An interest-only loan requires only interest payments for a certain period, with the principal paid later. An amortized loan requires both interest and principal payments throughout the loan term, gradually reducing the balance.
Where do extra mortgage payments go, principal or interest?
Extra mortgage payments typically go towards reducing the principal balance of the loan. This can help you pay off your mortgage faster and save on interest costs over time.
What is the difference between amortizing and interest-only loans?
Amortizing loans involve regular payments that reduce both the principal amount and interest over time, while interest-only loans require only interest payments for a set period before the principal is paid off in full.
How does paying off principal affect monthly payments?
Paying off principal reduces the amount you owe, which can lower your monthly payments by decreasing the interest charged on the remaining balance.
When mortgage payments are made in what way does the interest portion change each month and why?
Each month, the interest portion of the payment decreases and the principal portion of the payment increases. The interest decreases because the outstanding principal balance decreases each month as payments arev made. At the beginning of a loan, the interest portion of a payment is large and the principal is small. Towards the end of the loan, the interest portion is small and the principal portion is larger.
