Why don’t mortgage payments decrease each month to reflect the lower balance on the principal?
In: Economics
The interest to principal ratio changes each payment. So the amount of interest you pay each month goes down.
The interest is front loaded on a traditional mortgage to benefit the bank to protect them from people defaulting on the loan
Cars loans are the same way.
Think of it like this: at the start of the mortgage, the total amount of interest you will pay over the next 30 years is calculated. You are going to pay that amount. They just alter how much of that you pay early on.
Normally, you can also pay more toward the principal if you want that to go down faster. You can even structure that as part of a different kind of loan.
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