When you first start paying down your mortgage, nearly all of your payment is applied to the interest, with very little going to pay back the principal (also called the equity). With each payment, slightly less goes to interest and slightly more to principal, until the last payment is almost all principal.
Four parameters determine the total cost of a mortgage: The principal (equity), the interest rate, the frequency of payments, and the amortization period (total time for repayment).
In the example below, explore how the these parameters affect the structure of the mortgage. The black lines are the minimum payment per payment period (for example the monthly payment), the magenta lines are the amount of interest being paid, the blue lines are the amount being paid off of the loan, and the red line (right graph only) is the principal. The left graph shows the value of these over time, while the right graph shows the accumulated principal and interest paid over time.
The magenta and blue curves are exponential functions.
Use the sliders below the graphs to change the parameters for the principal, interest rate, payment frequency, and period of the mortgage.