Interest gobbles up most of your payment

Hundred dollar bills in shape of house

Borrowers are often surprised by how much they still owe on their home, even after making several years of payments.

That's because mortgages are like most consumer loans. First you pay the interest on your outstanding balance. What's left goes toward reducing your debt.

For nearly two-thirds of the typical home loan's life, most of the monthly payment is needed to cover interest costs.

Consider a $100,000 mortgage at 6% annual interest for 30 years. The monthly payment will always be $599.55 a month for principal and interest.

For the first month, $500 goes to pay your interest and the remaining $99.55 is applied against your debt.

With each passing month, the portion going to interest falls a little and the portion applied to reducing the principal increases.

But it takes almost 19 years until the amount is split equally between principal and interest.

It's not until the last 11 years of the loan that more than half of what you pay goes toward reducing your debt.

Our mortgage payment calculator will show you how much you'll pay in interest and principal for any loan. Just fill in the amount and terms and click "Show Amortization Table."

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