How Amortization Works
Each payment is split between interest and principal. In early months, most of the payment is interest. Over time, as the balance falls, more goes to principal. This is why paying extra in the early years saves the most interest.
Interest = Balance x Monthly Rate
Principal = Payment - Interest
New Balance = Balance - Principal
Frequently Asked Questions
Extra payments reduce the principal faster, which means less interest accrues each month. Even one extra payment per year on a 30-year mortgage can cut 4-6 years off the loan and save tens of thousands in interest.
The halfway point in interest vs principal typically occurs around 2/3 through the loan term. For a 30-year mortgage, you do not pay more principal than interest until around year 20.