See exactly how each payment breaks into principal and interest.

The early years of a mortgage are mostly interest.

Most U.S. buyers don't realize how front-loaded mortgage interest actually is. On a $340,000 loan at 6.75% over 30 years, the first year's payments split roughly 14% to principal and 86% to interest. By year five, the split has only shifted to about 17% principal. The fifteenth year is the rough crossover point where principal exceeds interest. Years 25-30 are mostly principal.

This isn't a flaw or a trick — it's how amortization works. Interest accrues on the remaining balance each month, so when the balance is highest (at origination), interest is highest. As you pay down the balance, less interest accrues, more of each fixed payment goes to principal, and the curve accelerates.

Why this changes how you think about prepayment

Because interest is front-loaded, extra payments made early in the loan have an outsized effect on total interest paid. An extra $200/month starting in month 1 of a 30-year mortgage saves significantly more total interest than the same extra payments starting in month 60. The principle: every dollar of extra principal payment eliminates the interest that would have accrued on that dollar for every remaining month of the loan. The earlier you pay it, the more months of saved interest.

The Early Payoff calculator models extra-payment scenarios directly. The amortization schedule above shows the baseline (no extras); compare to see how much faster the principal curve climbs with even modest extras.

Why this changes how you think about hold period

If you sell after 7 years on a 30-year loan, you've paid down about 12% of the loan principal — meaningful but not huge. The other 88% gets paid off from the sale proceeds. Combined with appreciation (or its absence), this is why hold period matters so much for the financial case for buying: short holds mean most of your monthly payment was interest, and most of your "equity" came from the down payment, not paydown.

The flip: if you hold 30 years, you build full ownership through paydown alone, regardless of appreciation. That's the structural strength of long holds in U.S. homeownership.

What 15-year vs. 30-year actually does to the math

A 15-year mortgage on the same $340,000 loan at the same 6.75% rate has a much higher monthly payment (about $3,008 vs. $2,205) but much less total interest paid over the life of the loan ($201,400 vs. $452,500 — roughly 55% less interest in absolute dollars). The trade-off: higher monthly cash outflow now in exchange for substantially lower total cost and faster equity-building.

15-year mortgages are most appropriate for buyers who can comfortably afford the higher payment without thinning reserves below safe thresholds. They're not categorically better than 30-year — the cash committed to the higher payment is cash not available for emergencies, retirement contributions, or other allocation. The right answer depends on your specific household situation, including the marginal value of the extra savings versus the marginal value of the flexibility.