 TITLE: How Much Interest Do You Pay on a Mortgage? CONTENT: How Does Mortgage Amortization Work?\n------------------------------------\nMortgages are generally fully amortized installment loans, which means you repay the loan over a fixed repayment term and your monthly payment gets split between the principal—the amount you borrowed—and interest. (Additionally, part of your monthly mortgage payment may also go toward other expenses, such as mortgage insurance, homeowners insurance and taxes.)\nA mortgage's amortization table shows how this split changes over time. For example, here's an amortization table with the first four and last four payments on a $280,000 mortgage with a 30-year term and a fixed 3.25% interest rate.\nMonth\nPayment\nPrincipal\nInterest\nBalance\nSept. 2020\n$1,218.00\n$459.67\n$758.33\n$279,540.33\nOct. 2020\n$1,218.00\n$460.91\n$757.09\n$279,079.42\nNov. 2020\n$1,218.00\n$462.16\n$755.84\n$278,617.26\nDec. 2020\n$1,218.00\n$463.41\n$754.59\n$278,153.85\n...\nMay 2050\n$1,218.00\n$1,203.95\n$14.05\n$3,982.82\nJune 2050\n$1,218.00\n$1,207.21\n$10.79\n$2,775.61\nJuly 2050\n$1,218.00\n$1,210.48\n$7.52\n$1,565.13\nAug. 2050\n$1,569.37\n$1,565.13\n$4.24\n$0.00\nIf you have a fixed-rate mortgage, your monthly mortgage payment will be the same over the life of your loan. Initially, most of your mortgage payment will go toward interest. But as you pay down the loan's principal balance, less interest accrues and a larger portion your payment goes toward the principal. By the end, nearly the entire payment goes to paying down the principal.\nWith an adjustable-rate mortgage (ARM), your monthly payment may change as the interest rate adjusts. The loan can still have a set repayment term, such as 15 or 30 years, and there are estimated amortization tables. However, when your rate adjusts, your monthly payment may be recalculated, or \"recast,\" based on a new amortizable table and the remaining loan term.\nThere are also mortgages that offer different payment arrangements and don't fully amortize. For example, you may make interest-only payments or relatively lower monthly payments for five to seven years, and then have to pay the entire remaining balance with one balloon payment. The arrangement can be beneficial if you plan on moving or refinancing soon, but you're also taking on a big risk if your plans fall through.\nIn some cases, your mortgage could also have negative amortization—when your monthly payment isn't enough to pay off the accruing interest and your balance grows. As a result, you can wind up owing more than your house is worth. END