Amortization: The Banks Silent Partner
Why the first 5 years of your mortgage are the most expensive, and how reducing balances work.
1. Front-Loaded Interest
In the early years of a loan, your payments almost entirely cover interest rather than principal. This is called a "Reducing Balance" system, and it ensures the bank gets paid first.
2. The Power of Extra Payments
Even a small extra payment in the first 24 months of a 30-year loan can shave years off the total duration. This is because every dollar of principal paid early stops generating interest for the remaining 28 years.
3. Fees vs. Rates
A lower interest rate with high upfront fees can be more expensive if you sell or refinance within 5-7 years. Always calculate the "Break-Even Point" before choosing a high-fee loan.
Expert Methodology
CalcFact stripping away the marketing "Complexity Gap" and showing you the raw data you need to win.