How Mortgage Amortization Works: Principal vs. Interest Over Time
Learn why early mortgage payments consist almost entirely of interest and how making small principal prepayments saves thousands.
Table of Contents
The Mechanics of Amortization Schedules
On a standard 30-year fixed home loan, your monthly payment remains identical every single month. However, the internal allocation changes drastically.
Because interest is calculated on your remaining balance, early payments are overwhelmingly allocated to interest. In Year 1, over 70% of each payment services interest fees.
The Multiplier Effect of Extra Principal Payments
Making just one additional monthly payment per year directly to your loan principal can shave 4 to 6 full years off a 30-year mortgage and save tens of thousands of dollars in lifetime interest.
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