Track 8 · Arithmetic · lesson 4
Where a mortgage payment actually goes
12 min
Track 8 · Arithmetic · lesson 4
12 min
Month one of a twenty-five year loan of 200,000 at 5%. The payment is about 1,169. Of that, 833 is interest and 336 comes off the debt.
Month two is almost identical, because the balance barely moved. So is month three. The borrower has handed over 3,500 and reduced what they owe by roughly a thousand, and this is not a scandal — it is what a level payment does.
The payment is constant. What it is made of is not.
Each period, interest is charged on whatever is still owed. The payment covers that first, and only what is left over touches the balance. Early on the balance is large, so the interest slice is large and the repayment slice is thin. Late on the balance is small, so almost the whole payment is repayment.
That is the entire mechanism of amortisation. Everything that feels unfair about the early years of a long loan falls out of it.
There is a specific month at which the payment stops being mostly interest and starts being mostly repayment. It matters because it is much later than anybody expects.
Predict
The chart below splits each payment into the interest part and the repayment part. They start far apart, cross once, and end far apart the other way.
Debt amortisation
Hypothetical model, not a forecast
The full repayment schedule for a fixed-rate debt paid off in equal instalments.
It assumes
It ignores
Move the rate and the term until more than half of everything handed over is interest rather than repayment. Watch the interest share readout.
| Month | Interest in this payment | Debt cleared by this payment |
|---|---|---|
| 0 | 0 | 0 |
| 1 | 833 | 336 |
| 2 | 832 | 337 |
| 3 | 831 | 339 |
| 4 | 829 | 340 |
| 5 | 828 | 341 |
| 6 | 826 | 343 |
| 7 | 825 | 344 |
| 8 | 823 | 346 |
| 9 | 822 | 347 |
| 10 | 821 | 349 |
| 11 | 819 | 350 |
| 12 | 818 | 352 |
| 13 | 816 | 353 |
| 14 | 815 | 355 |
| 15 | 813 | 356 |
| 16 | 812 | 357 |
| 17 | 810 | 359 |
| 18 | 809 | 360 |
| 19 | 807 | 362 |
| 20 | 806 | 363 |
| 21 | 804 | 365 |
| 22 | 803 | 366 |
| 23 | 801 | 368 |
| 24 | 800 | 370 |
| 25 | 798 | 371 |
| 26 | 797 | 373 |
| 27 | 795 | 374 |
| 28 | 793 | 376 |
| 29 | 792 | 377 |
| 30 | 790 | 379 |
| 31 | 789 | 380 |
| 32 | 787 | 382 |
| 33 | 786 | 384 |
| 34 | 784 | 385 |
| 35 | 782 | 387 |
| 36 | 781 | 388 |
| 37 | 779 | 390 |
| 38 | 777 | 392 |
| 39 | 776 | 393 |
| 40 | 774 | 395 |
| 41 | 773 | 397 |
| 42 | 771 | 398 |
| 43 | 769 | 400 |
| 44 | 768 | 402 |
| 45 | 766 | 403 |
| 46 | 764 | 405 |
| 47 | 763 | 407 |
| 48 | 761 | 408 |
| 49 | 759 | 410 |
| 50 | 757 | 412 |
| 51 | 756 | 413 |
| 52 | 754 | 415 |
| 53 | 752 | 417 |
| 54 | 751 | 419 |
| 55 | 749 | 420 |
| 56 | 747 | 422 |
| 57 | 745 | 424 |
| 58 | 744 | 426 |
| 59 | 742 | 427 |
| 60 | 740 | 429 |
| 61 | 738 | 431 |
| 62 | 736 | 433 |
| 63 | 735 | 435 |
| 64 | 733 | 436 |
| 65 | 731 | 438 |
| 66 | 729 | 440 |
| 67 | 727 | 442 |
| 68 | 725 | 444 |
| 69 | 724 | 446 |
| 70 | 722 | 447 |
| 71 | 720 | 449 |
| 72 | 718 | 451 |
| 73 | 716 | 453 |
| 74 | 714 | 455 |
| 75 | 712 | 457 |
| 76 | 710 | 459 |
| 77 | 709 | 461 |
| 78 | 707 | 463 |
| 79 | 705 | 465 |
| 80 | 703 | 466 |
| 81 | 701 | 468 |
| 82 | 699 | 470 |
| 83 | 697 | 472 |
| 84 | 695 | 474 |
| 85 | 693 | 476 |
| 86 | 691 | 478 |
| 87 | 689 | 480 |
| 88 | 687 | 482 |
| 89 | 685 | 484 |
| 90 | 683 | 486 |
| 91 | 681 | 488 |
| 92 | 679 | 490 |
| 93 | 677 | 492 |
| 94 | 675 | 494 |
| 95 | 673 | 496 |
| 96 | 671 | 499 |
| 97 | 669 | 501 |
| 98 | 666 | 503 |
| 99 | 664 | 505 |
| 100 | 662 | 507 |
| 101 | 660 | 509 |
| 102 | 658 | 511 |
| 103 | 656 | 513 |
| 104 | 654 | 515 |
| 105 | 652 | 518 |
| 106 | 649 | 520 |
| 107 | 647 | 522 |
| 108 | 645 | 524 |
| 109 | 643 | 526 |
| 110 | 641 | 528 |
| 111 | 639 | 531 |
| 112 | 636 | 533 |
| 113 | 634 | 535 |
| 114 | 632 | 537 |
| 115 | 630 | 540 |
| 116 | 627 | 542 |
| 117 | 625 | 544 |
| 118 | 623 | 546 |
| 119 | 621 | 549 |
| 120 | 618 | 551 |
| 121 | 616 | 553 |
| 122 | 614 | 555 |
| 123 | 611 | 558 |
| 124 | 609 | 560 |
| 125 | 607 | 562 |
| 126 | 604 | 565 |
| 127 | 602 | 567 |
| 128 | 600 | 569 |
| 129 | 597 | 572 |
| 130 | 595 | 574 |
| 131 | 593 | 577 |
| 132 | 590 | 579 |
| 133 | 588 | 581 |
| 134 | 585 | 584 |
| 135 | 583 | 586 |
| 136 | 580 | 589 |
| 137 | 578 | 591 |
| 138 | 576 | 594 |
| 139 | 573 | 596 |
| 140 | 571 | 599 |
| 141 | 568 | 601 |
| 142 | 566 | 604 |
| 143 | 563 | 606 |
| 144 | 561 | 609 |
| 145 | 558 | 611 |
| 146 | 555 | 614 |
| 147 | 553 | 616 |
| 148 | 550 | 619 |
| 149 | 548 | 621 |
| 150 | 545 | 624 |
| 151 | 543 | 627 |
| 152 | 540 | 629 |
| 153 | 537 | 632 |
| 154 | 535 | 634 |
| 155 | 532 | 637 |
| 156 | 529 | 640 |
| 157 | 527 | 642 |
| 158 | 524 | 645 |
| 159 | 521 | 648 |
| 160 | 519 | 651 |
| 161 | 516 | 653 |
| 162 | 513 | 656 |
| 163 | 510 | 659 |
| 164 | 508 | 661 |
| 165 | 505 | 664 |
| 166 | 502 | 667 |
| 167 | 499 | 670 |
| 168 | 497 | 673 |
| 169 | 494 | 675 |
| 170 | 491 | 678 |
| 171 | 488 | 681 |
| 172 | 485 | 684 |
| 173 | 483 | 687 |
| 174 | 480 | 690 |
| 175 | 477 | 692 |
| 176 | 474 | 695 |
| 177 | 471 | 698 |
| 178 | 468 | 701 |
| 179 | 465 | 704 |
| 180 | 462 | 707 |
| 181 | 459 | 710 |
| 182 | 456 | 713 |
| 183 | 453 | 716 |
| 184 | 450 | 719 |
| 185 | 447 | 722 |
| 186 | 444 | 725 |
| 187 | 441 | 728 |
| 188 | 438 | 731 |
| 189 | 435 | 734 |
| 190 | 432 | 737 |
| 191 | 429 | 740 |
| 192 | 426 | 743 |
| 193 | 423 | 746 |
| 194 | 420 | 749 |
| 195 | 417 | 752 |
| 196 | 414 | 756 |
| 197 | 410 | 759 |
| 198 | 407 | 762 |
| 199 | 404 | 765 |
| 200 | 401 | 768 |
| 201 | 398 | 771 |
| 202 | 395 | 775 |
| 203 | 391 | 778 |
| 204 | 388 | 781 |
| 205 | 385 | 784 |
| 206 | 382 | 788 |
| 207 | 378 | 791 |
| 208 | 375 | 794 |
| 209 | 372 | 798 |
| 210 | 368 | 801 |
| 211 | 365 | 804 |
| 212 | 362 | 808 |
| 213 | 358 | 811 |
| 214 | 355 | 814 |
| 215 | 352 | 818 |
| 216 | 348 | 821 |
| 217 | 345 | 825 |
| 218 | 341 | 828 |
| 219 | 338 | 831 |
| 220 | 334 | 835 |
| 221 | 331 | 838 |
| 222 | 327 | 842 |
| 223 | 324 | 845 |
| 224 | 320 | 849 |
| 225 | 317 | 852 |
| 226 | 313 | 856 |
| 227 | 310 | 860 |
| 228 | 306 | 863 |
| 229 | 302 | 867 |
| 230 | 299 | 870 |
| 231 | 295 | 874 |
| 232 | 292 | 878 |
| 233 | 288 | 881 |
| 234 | 284 | 885 |
| 235 | 281 | 889 |
| 236 | 277 | 892 |
| 237 | 273 | 896 |
| 238 | 269 | 900 |
| 239 | 266 | 903 |
| 240 | 262 | 907 |
| 241 | 258 | 911 |
| 242 | 254 | 915 |
| 243 | 251 | 919 |
| 244 | 247 | 922 |
| 245 | 243 | 926 |
| 246 | 239 | 930 |
| 247 | 235 | 934 |
| 248 | 231 | 938 |
| 249 | 227 | 942 |
| 250 | 223 | 946 |
| 251 | 219 | 950 |
| 252 | 216 | 954 |
| 253 | 212 | 958 |
| 254 | 208 | 962 |
| 255 | 204 | 966 |
| 256 | 200 | 970 |
| 257 | 195 | 974 |
| 258 | 191 | 978 |
| 259 | 187 | 982 |
| 260 | 183 | 986 |
| 261 | 179 | 990 |
| 262 | 175 | 994 |
| 263 | 171 | 998 |
| 264 | 167 | 1k |
| 265 | 163 | 1k |
| 266 | 158 | 1k |
| 267 | 154 | 1k |
| 268 | 150 | 1k |
| 269 | 146 | 1k |
| 270 | 141 | 1k |
| 271 | 137 | 1k |
| 272 | 133 | 1k |
| 273 | 128 | 1k |
| 274 | 124 | 1k |
| 275 | 120 | 1k |
| 276 | 115 | 1.1k |
| 277 | 111 | 1.1k |
| 278 | 107 | 1.1k |
| 279 | 102 | 1.1k |
| 280 | 97.76 | 1.1k |
| 281 | 93.3 | 1.1k |
| 282 | 88.81 | 1.1k |
| 283 | 84.31 | 1.1k |
| 284 | 79.79 | 1.1k |
| 285 | 75.25 | 1.1k |
| 286 | 70.69 | 1.1k |
| 287 | 66.12 | 1.1k |
| 288 | 61.52 | 1.1k |
| 289 | 56.91 | 1.1k |
| 290 | 52.27 | 1.1k |
| 291 | 47.62 | 1.1k |
| 292 | 42.94 | 1.1k |
| 293 | 38.25 | 1.1k |
| 294 | 33.54 | 1.1k |
| 295 | 28.81 | 1.1k |
| 296 | 24.06 | 1.1k |
| 297 | 19.29 | 1.1k |
| 298 | 14.49 | 1.2k |
| 299 | 9.68 | 1.2k |
| 300 | 4.85 | 1.2k |
Not there yet — keep moving the controls.
At the starting settings the interest share is about 43%, which is already higher than most borrowers would guess. Push the term to forty years at the same rate and it goes past half: the monthly payment falls by about 200, and roughly 112,000 more is handed over.
Two useful readings of that chart.
The early years feel like nothing is happening because nothing much is. The balance is what interest is charged on, and the balance has barely moved, so the interest bill has barely moved either.
And an extra payment made in month six removes interest from every one of the 294 months after it. The same payment made in month 290 removes interest from ten. The value of paying early is not a moral point about discipline; it is the number of future charges being deleted.
Check
Every amortising loan is fully determined by four numbers: the amount, the rate, the term and the payment frequency. Given three of them, the fourth is arithmetic, and so is the entire schedule.
Which means there is no proprietary information in a repayment table. Anybody can generate the whole thing, including the total interest, before agreeing to anything. The reason so few people do is that the payment is the number they were given and the total is the number they were not.