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Mortgage Payment v. Principle

by JoAnn Johnson
(Memphis, TN, Shelby)

Should most of your mortgage payment actually be applied to the principle portion of the loan? I was very surprised to see my monthly statements and how little is being applied to the principle!


Hello JoAnn;

Good question!

When you take out a mortgage, what takes place is the lender will do what is called an amortization table. You can do these yourself real easily.

You can play with my mortgage calculators all you want by visiting this link Mortgage Calculators and see for yourself how much of your monthly payment goes on the principal.

I suggest that people try and put an extra $50-$100 a month down on the principal so you can pay off the balance early.

If your mortgage is new, then most of your payment each month goes to pay the interest since the lender bases interest charges on the unpaid balance.

So then, the lower the balance the lower the interest amount you pay.

Use these calculators to see how much you can save if you make small extra principal payments each month.

In the real world, the principal part of our mortgage payment is the smaller amount.

Thanks for asking such a good question.



Comments for Mortgage Payment v. Principle

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Mortgage Payment v. Principle
by: Janice

Wow, I kept wondering why so little of my monthly payment was going toward the principle. I loved the idea of putting a little extra with my payment.

I always thought that extra principle payments meant I had to put an additional mortgage payment amount with my mortgage each month.

Never had considered that putting an extra $20 to $50 each month. That is more affordable. What a great suggestion.


Principle First
by: Anonymous

I am a private lender. For tax purposes
I would like my loan to be amortized so
more of the payment is principle, the reverse
of what the standard loan is.

Can I do this?



Hello Ed,

The answer to your question is yes and no. Yes in the fact that you can do this using an accelerated payment plan.

I would pay extra on principal each month and then you will save the interest at the end of the loan and pay it off sooner.

Feel free to visit my mortgage calculators page for help.

You cannot get a lender to do this for you since they make their money on the current way they amortize the loan.

Hope this helps,

Jeffrey Ragan

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