How a Mortgage Works
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A mortgage is a type of loan which is “amortized” (spread out) over a long period, normally 15-30 years. Each payment you make consists of principal (the actual loan money you received being paid back) and interest. At the beginning of the mortgage, almost all the payment you make each month consists of interest so the principal gets paid down very slowly. Near the end, each payment is mostly principal and the remaining balance is paid off quite quickly. This is why making extra principal payments near the beginning of your mortgage is such a money saver – you save all the interest you would have paid on that amount for the whole period of the mortgage.
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