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Why early payments are mostly interest, when the crossover happens, and how extra payments change everything.
When you take out a mortgage or a car loan, your monthly payment stays the same, but the internal "math" of that payment changes every single month. This is called amortization.
Interest is calculated based on your remaining balance. In the beginning, your balance is high, so the interest is high. As you pay down the principal, the interest portion of your payment shrinks.
On a 30-year mortgage, you typically don't start paying more principal than interest until around year 15. This is why the first decade of homeownership feels like you aren't building much equity.
Because interest is calculated based on the balance, any extra principal payment reduces the interest you'll owe for every remaining month of the loan. This has a compounding effect on your payoff timeline.
Check your full schedule with our Loan EMI & Amortization Calculator.
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