On your first mortgage payment, the vast majority of what you send goes to interest — not principal. That feels wrong. Here's why it happens and how it changes over time.
What is amortization?
Amortization is the process of paying off a loan through scheduled payments over time. Each monthly payment covers the interest owed for that month plus a portion of the principal. The balance between those two shifts every month.
Why you pay mostly interest at first
Your interest charge each month is calculated on your remaining balance. At the start, your balance is at its highest — so your interest charge is at its highest. As you pay down the balance, less interest accrues, and more of each payment goes to principal.
The total cost of a 30-year loan
This is where amortization can be sobering. A $350,000 loan at 7% over 30 years results in total payments of about $838,440 — more than double what you borrowed. That extra $488,440 is all interest paid to the lender over 30 years.
How extra payments help so much
When you make an extra principal payment, you reduce the balance — which means less interest accrues next month, and every month after. Even $100-$200 extra per month early in the loan can shave years off your payoff and save tens of thousands in interest.
Ask your servicer to confirm that extra payments are applied to principal. Specify "apply to principal" when making additional payments.