How does my mortgage payment break down?
Your mortgage payment always includes (1) repayment of principal and (2) interest. It may also include amounts to pay your real estate taxes, mortgage insurance, etc. To get a breakdown of this ask your lender to give you a detailed statement. Now, let’s just talk about interest and repayment of principal. When you first start paying off your mortgage, almost all of each payment goes for interest. The reason is that the amount on which you pay interest is the full amount of the loan. A small amount of the money goes to reducing principal. The next payment is a little different. By that time the principal has been reduced (slightly) by the amount you paid for principal reduction in your first payment. So, the interest you owe and pay is a little less. Since you pay a fixed amount each month that leaves a little more money to pay for principal reduction. This process goes on so that — gradually — the amount that goes to interest gets smaller and smaller and the amount toward principal
