The payment amount never changes — the split does
A fixed-rate mortgage has a level monthly payment for the entire term — that number is locked in from day one. What changes every month is how that fixed payment is split between interest (the lender's charge for the money you still owe) and principal (what actually pays down the balance).
Why interest is front-loaded
Interest for a given month is calculated as the loan's remaining balance times the monthly interest rate. On day one, the remaining balance is the entire loan amount — as large as it will ever be — so the interest charge that month is also as large as it will ever be. Whatever's left of the fixed payment after covering that interest goes to principal, which early on isn't much.
Each month, the balance drops by that (small) principal amount, so next month's interest charge is calculated on a slightly smaller number. The interest portion shrinks a little every month, and the principal portion grows by exactly that same amount — the two always add up to the same fixed payment.
A simplified worked example
Take a $300,000 loan at 6% annual interest (0.5% monthly), with a payment of roughly $1,799/month on a 30-year term:
- Month 1: Interest = $300,000 × 0.5% = $1,500. Principal = $1,799 − $1,500 = $299.
- Month 2: New balance = $299,701. Interest = $299,701 × 0.5% ≈ $1,498.51. Principal ≈ $300.49.
- Fast forward to year 15 (halfway through the term): the balance has only fallen to roughly $215,000 — not close to half paid off — because most of the early payments went to interest, not principal.
Try your own loan amount, rate, and term in the Mortgage Calculator to see the full month-by-month schedule, or use the Amortization Calculator for any other type of loan.
What this means for extra payments
Because interest is charged on the remaining balance, an extra payment made early in the loan reduces the balance while it's still large — which reduces every future interest charge calculated on that balance. The same extra payment made in year 25 has far less effect, since the balance (and therefore the interest being saved) is much smaller by then. This is why financial advice about mortgages so often centers on paying extra early rather than waiting.