Same monthly payment for 30 years. Inside that payment, the split between interest and principal shifts every single month. The graph is sobering.
If you have ever stared at a number on a form and wondered where it came from, you are not alone. Same monthly payment for 30 years. Inside that payment, the split between interest and principal shifts every single month. The graph is sobering.
On a $300,000, 30-year mortgage at 6%, the first payment is ~$1,800. About $1,500 is interest. $300 actually pays down the house.
Same payment. Interest portion drops to ~$1,000. Principal jumps to ~$800.
Almost all principal. By then you have paid roughly twice the home's price in total dollars.
One extra payment a year cuts a 30-year mortgage to ~25 years and saves tens of thousands in interest.
Should I refinance to 15 years? Math says yes if rates are lower; cash-flow says only if the bigger payment fits comfortably.
Why does my balance barely move in year one? That's amortization. Front-loaded interest is normal — and it's exactly why prepayment is so powerful.
Bookmark the calculator linked above — you will need it more often than you think.