TIP (Total Interest Percentage)
FinancingTIP — Total Interest Percentage — is a figure disclosed on your mortgage Closing Disclosure that shows the total interest you would pay over the full life of the loan, expressed as a percentage of the amount you borrowed. A 30-year loan at 6–7% often carries a TIP well over 100%, meaning the scheduled interest adds up to more than the original loan itself.
How it works. TIP simply sums every scheduled interest payment and divides it by the loan amount, assuming you keep the loan the entire term and make only the minimum payment. It is the number HELOC and “velocity banking” marketers love to quote — “your 6% rate is really 130%!” — to make a fixed mortgage sound like a trap.
Know your TIP, but don’t let it scare you into a riskier product. It is a nominal number: it ignores inflation and the time value of money (interest paid in year 28 is far cheaper in real terms than a dollar today), and it assumes you never prepay. A low fixed rate is not a scam. The honest lesson is the opposite of the pitch — the way to crush total interest is to pay the balance down faster, which you can do on a plain mortgage just as well as on a first-lien HELOC.
Example. A $400,000 loan at 7% over 30 years pays roughly $558,000 in interest — a TIP of about 140%. But applying an extra $2,000 a month to principal pays it off in about 10 years and collapses the interest to roughly $156,000 — and that improvement comes from the extra payment, not from swapping to a variable-rate line.
See how the payoff math actually compares in HELOCs & portfolio loans and the average daily balance method.