What does a greater percentage of the mortgage payment apply to over time as the mortgage is paid off?

As a mortgage is paid off, a greater percentage of each payment is allocated to principal. This reflects the typical amortization structure of most mortgages, where the early years involve higher interest payments compared to principal payments. The rationale behind this is that interest is calculated on the remaining balance of the mortgage, which is larger at the beginning of the loan term.

Over time, as payments are made and the principal balance decreases, the interest charged each month also decreases. Consequently, more of the fixed monthly payment goes towards reducing the principal. This shift means that homeowners build equity in their property at an accelerated rate in the later years of the mortgage, as a larger portion of each payment is directed toward paying down the loan itself.

Understanding this dynamic is essential for homeowners and potential buyers, as it impacts financial planning and equity accumulation during the life of the mortgage.