Blended mortgage payments

Most mortgages these days are based on blended payments. A blended payment is one in which each payment you make includes an amount applied to the interest (the interest you are paying each month for the loan), and an amount applied toward the principal (the amount you borrowed).

How much of each payment is interest and how much is principal will depend on how far you are into repaying the mortgage. The earlier in your term you are, the more you pay in interest and the less in principal.

For example, if your payment is $800 a month, your first payment might be applied as $600 towards interest and $200 against the principal. In month 48 of a five year mortgage your $800 payment might be applied $400 towards interest and $400 against the principal. Nevertheless, your total payments remain the same.

The mortgage statement you receive at the end of each year will show exactly how much was applied from each payment to interest and principal.
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