Why Is The Mortgage Not Reducing?

December 12, 2017
Raymond Teh

Many borrowers wonder why their mortgage debt reduces minimally on principal & interest repayment. At loan commencement, some 70 percent of repayment goes toward repaying interest instead of principal reduction. As time passes, more repayment goes towards principal reduction until, in the final year, almost all repayment is used to repay the mortgage.

Assuming a $500,000 mortgage @ 4 percent with 30-year loan term, the minimum monthly repayment is $2,387. The split between principal and interest repayment are as follow:

All lenders calculate repayment on a principal & interest mortgage identically.

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