A mortgage payment is the same amount every month, which makes it look like it does the same thing every month. It does not. The first payment on a thirty-year loan is almost entirely interest; the last one is almost entirely principal; and the point where those two swap is much later than most people expect. This page shows the split, month by month.
Someone has a loan payment in front of them that has not changed and cannot understand why the balance is barely moving, and wants to see the split rather than be told about it.
Interest is charged on whatever is still owed. At the start of a thirty-year mortgage that is the whole loan, so the first month's interest is the largest it will ever be. On $300,000 at 6.5% the monthly rate is 0.541667%, which is $1,625.00 — and the payment is $1,896.20. That leaves $271.20 to reduce the balance.
So the first payment moves the balance by 0.09%. The loan is $300,000 and after one month it is $299,728.80. Nothing about that is a malfunction; it is what a level payment against a large balance looks like at the beginning, and it is the reason the early years of a mortgage feel like they accomplish nothing.
The first twelve payments tell the same story in aggregate. They total $22,754.45, of which $19,401.27 is interest and $3,353.18 is principal. Roughly eighty-five cents of every dollar in year one buys time rather than equity.
Principal overtakes interest in month 233 of a thirty-year loan. That is year nineteen and a half, out of thirty. For the first nineteen years and four months, more than half of every payment is interest. I did not expect that number when I first computed it, and it is the single most useful figure on this page.
It follows directly from the arithmetic. Principal exceeds interest when the monthly interest charge falls below half the payment, which happens when the balance has fallen below about $175,000 — a bit over half the original loan. Getting the balance from $300,000 to $175,000 takes nineteen years at this rate, because the principal portion of each payment is small for most of that time.
The term is what moves this. On a $250,000 loan at 5.25% over fifteen years, principal overtakes interest in month 23 — under two years. The payment is higher ($2,009.69 against $1,896.20) and the balance is smaller, so the crossover arrives sixteen years earlier. Term length is not a detail; it is the main variable.
Halfway through a thirty-year term, month 180, the balance is $217,677.42 — 72.6% of the original loan. Half the time has passed and less than a third of the debt has gone. This is the fact that makes the crossover month make sense: for most of the term the balance is barely falling, so the interest charge is barely falling either.
The same effect is weaker on a shorter loan but still present. On the fifteen-year example the balance at month 90 is $149,244.62, or 59.7% of the original. Half the term, four-tenths of the debt cleared — better than the thirty-year case, and still not intuitive.
This is why overpaying early is worth so much more than overpaying late, and why the standard advice to overpay in the first years is not sentimentality. An extra dollar paid in year one removes itself from the balance for 359 further interest calculations. The same dollar paid in year twenty-nine removes itself from eleven.
interest(m) = balance(m−1) × APR ÷ 12 principal(m) = payment − interest(m) balance(m) = balance(m−1) − principal(m)
The payment itself comes from the standard amortising formula, and everything else here is bookkeeping on top of it. The reason the split moves is the only reason that matters: interest is charged on the balance, the balance only falls by the principal part, so as the balance falls the interest part shrinks and the principal part grows — with the payment held constant.
The payment is $1,896.20. The first month splits into $1,625.00 of interest and $271.20 of principal, so 85.7% of the payment buys nothing. The principal portion of the monthly payment does not exceed the interest portion until month 233 — year 19.4. At the halfway point of the term, month 180, the balance is still $217,677.42, which is 72.6% of what was borrowed. Across the full term the interest totals $382,633.47, more than the loan itself.
The same loan logic on a shorter term and a lower rate. The payment is $2,009.69, only $113.49 more than Example 1. The first month is $1,093.75 of interest and $915.94 of principal — 54.4%, so nearly half the first payment already reduces the balance. The principal portion of the monthly payment overtakes the interest portion in month 23, under two years in. At the halfway point, month 90, $149,244.62 is still owed, 59.7% of the loan. Total interest is $111,744.97, which is $270,888.50 less than Example 1 for a payment $113.49 a month higher.
Set the rate to zero and the schedule degenerates in a way worth seeing once. The payment is $300,000 divided by 360, which is $833.33, and every cent of it is principal — there is no interest charge to absorb any part of it. The balance falls in a straight line, the first-payment interest share is 0%, and the crossover is month 1 because principal exceeds a zero interest charge immediately. At month 180 the balance is exactly $150,000.00 — half the loan, and the check that the halfway month really is the halfway month. It is the shape the schedule would have if interest did not exist, which is the clearest way to see what interest is doing to the other two examples.
| Year | Interest paid | Principal paid | Balance left |
|---|---|---|---|
| 1 | $19,401.27 | $3,353.18 | $296,646.82 |
| 2 | $19,176.70 | $3,577.74 | $293,069.08 |
| 3 | $18,937.10 | $3,817.35 | $289,251.73 |
| 4 | $18,681.44 | $4,073.01 | $285,178.72 |
| 5 | $18,408.66 | $4,345.79 | $280,832.93 |
| 6 | $18,117.62 | $4,636.83 | $276,196.10 |
| 7 | $17,807.08 | $4,947.37 | $271,248.73 |
| 8 | $17,475.75 | $5,278.70 | $265,970.03 |
| 9 | $17,122.22 | $5,632.23 | $260,337.81 |
| 10 | $16,745.02 | $6,009.43 | $254,328.38 |
| 11 | $16,342.56 | $6,411.89 | $247,916.49 |
| 12 | $15,913.14 | $6,841.31 | $241,075.18 |
| 13 | $15,454.97 | $7,299.48 | $233,775.70 |
| 14 | $14,966.11 | $7,788.34 | $225,987.36 |
| 15 | $14,444.51 | $8,309.94 | $217,677.42 |
| 16 | $13,887.98 | $8,866.47 | $208,810.95 |
| 17 | $13,294.17 | $9,460.28 | $199,350.68 |
| 18 | $12,660.60 | $10,093.85 | $189,256.83 |
| 19 | $11,984.60 | $10,769.85 | $178,486.98 |
| 20 | $11,263.32 | $11,491.13 | $166,995.85 |
| 21 | $10,493.74 | $12,260.71 | $154,735.14 |
| 22 | $9,672.62 | $13,081.83 | $141,653.30 |
| 23 | $8,796.50 | $13,957.95 | $127,695.36 |
| 24 | $7,861.71 | $14,892.74 | $112,802.62 |
| 25 | $6,864.32 | $15,890.13 | $96,912.49 |
| 26 | $5,800.13 | $16,954.32 | $79,958.16 |
| 27 | $4,664.66 | $18,089.79 | $61,868.38 |
| 28 | $3,453.16 | $19,301.29 | $42,567.08 |
| 29 | $2,160.51 | $20,593.94 | $21,973.15 |
| 30 | $781.30 | $21,973.15 | $0.00 |
It means paying a debt down on a schedule where the payment stays the same but its composition changes. Each payment covers the interest charged since the last one, and whatever is left over reduces the balance. Because the balance falls, the interest charge falls, so the principal part grows — slowly at first and then quickly.
Because on a long loan at the start, most of the payment is interest. On $300,000 at 6.5% the first payment is $1,896.20, of which $1,625.00 is interest and only $271.20 reduces the balance. The balance does fall, but at 0.09% a month it is not visible on a statement.
Much later than halfway through the term. On a $300,000 loan at 6.5% over thirty years the balance is still 72.6% of the original at month 180. The loan does not reach half repaid until around month 250 — about twenty-one years in. A shorter term changes this substantially: on a $250,000 fifteen-year loan at 5.25% the balance at the halfway point is 59.7%. Note that this is a different loan at a different rate, not the same loan shortened — the rate matters as much as the term.
Yes, and it changes the shape rather than just the length. An extra payment goes entirely to principal, so it lowers the balance immediately and every later month's interest with it. That pulls the crossover month earlier and shortens the term. It is the same schedule with the early part compressed.
The remaining balance, every month. That is the entire mechanism behind the schedule: the charge is proportional to what is still owed, so it falls as the loan is paid down. It is also why the same loan costs so much more over thirty years than over fifteen — not because the rate is higher, but because the balance stays large for far longer.