[quesera]

Interesting. If I understand the math correctly, that means that you have an effectively variable interest rate over the life of the loan (though presumably it will average out to the 3.5%). Is there a special name for that kind of loan?

The reason mortgages front load the interest is not to victimize borrowers (that's just a pleasant side effect) but because in the early days of the loan, you are using more of the lender's money. You pay it back slowly, but you pay interest in each payment on the amount that you're using at that point in the term.

So payment #1, you pay interest on ~100% of the loan. Plus a little extra to reduce your principal. Next payment is interest on ~99.8% (100% minus 1/360th), plus a little extra (more than last time) for principal reduction so that the payments total the same amount. On and on til payment #360.

If you're paying 40% principal on payment #1, by my math, either your effective interest rate is variable over the term, or you're choosing to overpay the invoice (applying the excess to principal -- which makes a huge difference in the early years).

I'm surprised the economics of buying work out so well in SF these days. When I left, it was the other way around. Interest rates help a lot. Congrats on the house!

[jquery]

It's not variable, it's fixed at 3.5% for 30 years. A "jumbo" loan has a higher interest rate than a conventional simply because of its high initial principal, making it a riskier proposition for the bank. What calculator are you using to calculate principal vs interest for a fixed rate loan? Remember, the lower the fixed interest rate, the higher % of principal you are paying at day 0.

The economics of buying vs renting has changed a great deal since I moved here. 5 years ago, buying was rather questionable. I took advantage of "cheap" rents to save up for buying a house when it finally became a buyer's market. Now rents have nearly doubled, but housing prices haven't gone up proportionately.