Many homeowners are surprised when they first learn how their mortgage payments are allocated. If you’ve been paying your mortgage for a few years, you may assume that each payment is steadily chipping away at your principal balance. In reality, during the early years of a typical mortgage, a larger portion of your payment goes toward interest rather than the principal.
Why does this happen? Mortgages are structured so that lenders recover their interest first. Early in the loan, your outstanding balance is at its highest, which means the interest portion of your payment is also higher. While it can feel discouraging to see only a small reduction in your principal at first, this gradually changes over time. As the balance decreases, a greater portion of each payment is applied directly to the principal, helping your equity build faster and reducing the overall interest you pay throughout the life of your loan.
Have you scheduled your annual mortgage review?
Reviewing your mortgage strategy on a regular basis can make a meaningful difference. Small adjustments, such as increasing your payment amount, switching to a shorter amortization or exploring prepayment options, can significantly reduce the total interest you pay – helping you pay off your mortgage sooner.
Even minor changes can have a compounding effect, making your payments work harder for you. That’s where your mortgage agent comes in. A quick mortgage review with a professional can help ensure your payments are structured as efficiently as possible and that your mortgage strategy aligns with your long-term financial goals.
By remaining informed and proactive when it comes to your mortgage, you can make strategic decisions that save you money, build equity faster and bring you closer to financial freedom. So, if it has been a while since your last mortgage review, now is the perfect time to connect with your mortgage agent and ensure your payments are working as hard as they can for you.
Wondering if a mortgage review makes sense for you? Answers to all your questions are a call or email away!