What Amortization Actually Does
Each month, interest accrues on the remaining balance, and your fixed payment covers that interest plus a slice of principal. Because the balance is huge early on, the interest slice dominates, then the mix flips as principal shrinks.
On a $300,000 loan at 6.5% over 30 years, month one pays about $1,625 in interest and only $271 in principal. By year 20, that ratio has inverted.
Where the Real Cost Hides
The monthly payment on that loan is $1,896, but total payments reach $682,000. The interest ($382,000) exceeds the amount borrowed, and it's front-loaded into the years when life is least predictable.
Every extra dollar of principal prepaid skips all future interest on that dollar. One extra payment per year shaves about four years off a 30-year term.
The 15-Year Decision, Quantified
Same $300,000 at 6.5%: the 15-year payment is $2,613, 38% higher, but total interest falls to $170,400, a $212,000 saving. The trade is cash-flow flexibility versus guaranteed interest savings.
The pragmatic middle path: take the 30-year for flexibility, then prepay like a 15-year when income allows. The amortization math rewards the prepayment identically.
Sources
FAQ
Why is most of my first payment interest?
Interest accrues on the whole remaining balance, which is largest at the start, so early payments barely dent principal.
Should I choose 15 or 30 years?
15-year: higher payment, far less total interest. 30-year: flexibility. If cash flow allows, the 15-year usually wins mathematically.
Does paying extra really help?
Dramatically, extra payments hit principal directly. One extra payment yearly cuts ~4 years off a 30-year loan.
Please read this first: these results are educational estimates. For real decisions, talk to a qualified professional.