How Your Mortgage Rate Determines the Interest Portion of Your Mortgage Payment
If you take out a mortgage for $100,000 and amortize it over 30 years (meaning you will be paying it back over a 30 year period), the balance or principle you need to pay back is $100,000. If your interest rate is 6%, then your monthly payment will be about $599.55.
Your first mortgage payment will be split up as follows: $500 in interest and $99.55 in principal. However, on your next payment you will only be paying $499.50 in interest because your first payment brought down your balance by $99.55 so you were paying 6% of a slightly smaller number.
This decrease in interest payment and increase in principal payment will continue until at the end of your 30 year amortization period, most of your monthly payment will be going to pay off your principal.
So, by the beginning of your 30th year, you will be paying $8.91 in interest and $590.64 in principal. This is assuming that you have a constant interest rate of 6%.
Different rates will change the amounts that you pay, but the idea that you pay more at the start in interest and less at the end of your mortgage will still apply.
Here’s a great mortgage calculator that will give you the breakdown of your principal and interest payments in different scenarios.