**The fundamental asymmetry of amortization **

The majority of early mortgage payments go to interest. The ratio of principal increases slowly over time but the distribution is very asymmetric. It takes **82 months to repay the first $50,000** of a $500K loan at an interest rate of 6%. But, it only takes **16 months to repay the last $50,000**. That's 5x slower at the start. The asymmetry is more extreme for longer loans with higher interest rates with many ripple effects.

**The negative impact of amortization today **

1. **Short-term homeowners lose the hardest earned equity - ** Since amortizations don't build equity equally, a 6% transaction cost represents 4+ years of lost equity for short-term homeowners. The same 6% represents only 1-2 years of lost equity for long-term homeowners. As families become increasingly mobile, amortization adds salt to the wound of high transaction costs.

2. **Refinancing reduces the rate but restarts amortization** - Monthly payments decrease when you refinance for two reasons. First is a lower interest rate. Second is the re-amortization of a smaller loan balance over a longer term. An unintended consequence is a slower pace of equity build-up. In fact, some homeowners who restart their loans could pay more interest over time.

3. **Expensive homes typically mean longer amortization - ** As homes get less affordable, 90% of homebuyers choose a 30yr fixed rate mortgage. Lenders have started introducing 40yr terms as well. That's terrible for building wealth. Amortization helps banks, not people, and keeps you in debt for longer.