It is possible for someone to pay their mortgage monthly for years without significantly reducing the principal because in the early years of a typical amortizing mortgage, most of the monthly payment goes toward paying the interest rather than the principal. This is due to how fixed-rate mortgages are structured: the loan is amortized over the term, and initially, the loan balance is high, so the interest portion is large. Over time, as the principal gets paid down, a larger share of each payment goes toward reducing the principal, but in the beginning, the principal decreases very slowly. Additional factors include:
- The payment amount stays the same while the interest portion decreases and the principal portion increases gradually.
- Paying only the scheduled amount means the principal reduction happens slowly in early years.
- Without making extra payments toward the principal or refinancing, this slow reduction pattern continues.
This is why someone could pay for years and see only a small decrease in principal balance initially despite making regular monthly payments.
