Question

In a typical 15 year mortagage with a normal interest rate (normal APR), as your making payments every month, are you paying off a higher portion of the principal or the interest?

For example, in year 15 (your last year), what is a higher % each month, principal or interest?

Answer 1

In the initial payments the interest is higher while in the later payments the principal is higher. So the interest decreases with each payment and the principal increases with each payment. In year 15, Principal will have a higher % each month. This happens because in the initial payments (at the start of mortgage) the loan outstanding is high and interest is charged on outstanding loan balance at the beginning of every period. As the principal is repaid the outstanding loan balance decreases and so the interest decreases. With the monthly payment remaining the same the principal increases.

So, in year 15(last year) principal will have a higher % each month