Mortgage Payment Breakdown: What You Actually Pay

February 17, 2026 |

finance mortgage

A fixed-rate mortgage payment stays the same every month for the life of the loan. But the split between principal and interest shifts dramatically over time. Here is exactly how that works.

The monthly payment formula

The standard amortization formula is:

M = P x [r(1+r)^n] / [(1+r)^n - 1]

Where:

M = estimated monthly payment
P = loan principal (amount borrowed)
r = monthly interest rate (annual rate / 12)
n = total number of monthly payments (years x 12)

Worked example: $350,000 at 6.5% for 30 years

Plug in the numbers:

P = $350,000
r = 0.065 / 12 = 0.005417
n = 30 x 12 = 360

M = 350,000 x [0.005417(1.005417)^360] / [(1.005417)^360 - 1]

The estimated monthly payment is approximately $2,212.

Over 30 years, the estimated total paid is approximately $796,320. That means roughly $446,320 goes to interest on a $350,000 loan. Interest accounts for approximately 56% of total payments.

Why early payments are mostly interest

Each month, the lender calculates interest on the remaining balance. In the early years, that balance is high, so most of the payment goes to interest.

Month 1 breakdown:

Interest charge: $350,000 x 0.005417 = approximately $1,896
Principal paid: $2,212 - $1,896 = approximately $316

In the first month, about 86% of the payment goes to interest. Only $316 reduces the loan balance.

Month 180 (year 15) breakdown:

By month 180, the remaining balance is approximately $266,000.

Interest charge: $266,000 x 0.005417 = approximately $1,441
Principal paid: $2,212 - $1,441 = approximately $771

Now about 35% of the payment goes to principal. The ratio is shifting.

Month 348 (year 29) breakdown:

The remaining balance is approximately $26,000.

Interest charge: $26,000 x 0.005417 = approximately $141
Principal paid: $2,212 - $141 = approximately $2,071

By the final years, over 93% of each payment goes to principal.

Year-by-year principal vs. interest

Here is the approximate split for selected years on this $350,000 loan at 6.5%:

Year	Estimated annual interest	Estimated annual principal	Remaining balance
1	$22,600	$3,940	$346,060
5	$21,520	$5,020	$330,700
10	$19,640	$6,900	$306,800
15	$17,020	$9,520	$273,500
20	$13,370	$13,170	$227,600
25	$8,350	$18,190	$163,100
30	$1,460	$25,080	$0

The crossover point, where principal paid first exceeds interest paid in a given year, happens around year 20 on this loan. For the first two-thirds of the loan, the lender collects more interest than principal each year.

What this means in practice

Extra payments toward principal have the biggest impact in the early years. An extra $200 per month starting in year 1 on this loan would save approximately $98,000 in total interest and pay off the loan roughly 6 years early.

The exact savings depend on the loan terms. Shorter loan terms (15 years vs. 30 years) shift the principal-to-interest ratio earlier, because the balance decreases faster. Higher interest rates make the early-year interest share even more extreme.

Key takeaways

The monthly payment stays flat, but the principal-to-interest ratio changes every month
On a $350,000 loan at 6.5%, the estimated first payment is 86% interest and 14% principal
The crossover point where principal exceeds interest is around year 20 on a 30-year loan
Estimated total interest on this example loan is approximately $446,000, or 56% of total payments
Extra principal payments in the early years have the largest impact on total interest saved

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