Understanding Your Mortgage Payment: Principal vs Interest
What Makes Up a Mortgage Payment?
A typical mortgage payment includes: Principal (loan amount), Interest (cost of borrowing), Property taxes, and Insurance. This is often called PITI.
Principal vs Interest Over Time
In early years, most of your payment goes to interest. By year 15-20 of a 30-year mortgage, principal payments exceed interest. An amortization schedule shows this breakdown month by month.
How to Reduce Total Interest
1. Make extra principal payments. 2. Choose a 15-year term instead of 30. 3. Refinance to a lower rate. 4. Make biweekly payments (26 half-payments = 13 full payments per year).
Using the Mortgage Calculator
Enter your loan amount, interest rate, and term. The calculator shows your monthly payment, total interest paid, and full amortization schedule. Experiment with different scenarios.
Fixed vs Adjustable Rate
Fixed-rate mortgages have the same rate for the entire term. Adjustable-rate mortgages (ARMs) start with a lower rate that changes over time. Fixed is safer; ARM can save money if rates drop.