Open your first mortgage statement and one number jumps out: almost everything you paid went to interest. It feels like a tax on naivety. It's actually just arithmetic — and once you see it, you understand why every extra dollar toward principal matters so much.
The one formula
Each month, interest equals your current loan balance × (annual rate ÷ 12). Nothing else. Your rate is quoted as an APR, divided into a monthly rate, then multiplied by whatever principal is still owed that month.
Take a $360,000 loan at 6.5%: the monthly rate is 6.5% ÷ 12, so month one's interest is roughly $1,950. Your $2,275 payment means only about $325 actually cuts the balance. Repeat, and the balance stays big for a long time.
The two parts of every payment
Your fixed monthly payment never changes on a fixed-rate loan, but its two halves flip over time:
| Point in term | Interest share | Principal share |
|---|---|---|
| Month 1 | ~86% | ~14% |
| Mid-point | ~65–70% | ~30–35% |
| Final year | ~5% | ~95% |
The payment stays flat; the mixture silently pivots as the balance falls.
Why that favors earlier payoff
Because interest is charged on the current balance, knocking down principal early kills interest on the entire remaining term — not just one month. An extra $1,000 in year one can shave more off your total interest than the same $1,000 in year twenty.
Watch it happen
Enter your own price and rate in the HomMetra calculator and flip to the monthly schedule — you'll see the interest column shrink month by month, and the exact month your principal finally outpaces it. That's the moment the loan turns your way.