- To borrow money, the lender, usually a bank wants more money back than it gave you.That money is called
.__interest__ - The actual amount you borrow is called the
.__principle__ - The amount of time you have to pay it back is called the
.__term__ - The lender will let you know what percentage of the principle they will accept as payment for the loan, this is the
.__interest rate__

- Based on the interest rate, closing fees and quite a bit of Voodoo, you're given an annual percentage rate known as an
.__APR__

While all this seems pretty straightforward, a practical matter arises when the debtor begins making payments.

Initially, the debt is still large, so interest payment is proportionally large.

Near the end of the term, as the debt decreases, the interest payment becomes equally small.

What was needed was a mathematical way to distribute the amount of interest across the term of the loan.

And so began the era of modern mortgage lending.

A fascinating subject that combines economics and mathematics in such a way that somehow becomes even less interesting than the sum of its parts, it truly defies logic.

Hopefully, armed with knowledge you'll be better equipped to hold your own in a negotiation over the terms of your next home loan.