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Finance6 min read
Understanding Mortgage Amortization: Where Your Interest Really Goes
Of each monthly payment, how much is principal versus interest? Early on, you're mostly paying interest. Use a [mortgage calculator](/finance/mortgage) to see your repayment structure and judge whether early repayment pays off.
Amortization means the loan is repaid in periodic installments of a fixed amount, but the split between principal and interest shifts every period.
Interest first, principal later
With a fixed monthly payment, early payments are mostly interest and little principal. As the balance falls, the interest portion shrinks. Use a mortgage calculator to see the yearly principal/interest breakdown.
When rates are low, the savings from prepayment are limited; at high rates or with spare cash, prepaying can cut total interest substantially. Weigh it against your investment return.