With conventional financing what is the average percentage of the monthly payment that applies to principal pay down?
It depends greatly on the maturity of the loan…
Keith
Google “amortization tables” to get examples of how payments are allocated between principal and interest during the life of a loan.
Not very much, and the longer the repayment period, the smaller the amount that gets paid off the balance. I’ve got a mortgage with a $1200 payment and about $150 goes to pay off the balance. The rest is interest.
Your loan statement should tell you. There will be a document at closing that tells you.
You can go to an amortization calculator and feed in various amounts, repayment periods, and interest rates and it will tell you how much you end up paying in interest.
Also, the amount that applies to the balance gets larger with each payment. The first years of the mortgage, you are paying almost all interest and very little principle. The last years of the mortgage, you are paying mostly principle and not so much interest.
If you send a hundred or two hundred extra each month for a couple of years, right at the beginning, you literally take years off the end of the mortgage payments and thousands of dollars off what you end up paying.
With my mortgage above, if I send an extra $150, right in the beginning, it literally removes an entire payment off the end of the loan, saving me a $1200 payment. That’s a pretty good return for $150.
The amount that you would have to send to remove a payment from the end gets larger each month, so your best return is within the first few years of the mortgage.