![]() If rates decrease, your mortgage will be paid off faster.Ī principal is the original amount of a loan or investment. This will cause your mortgage to be paid off slower than scheduled. This will reduce the amount of principal that is being paid. ![]() If interest rates rise, more of your mortgage payment will go towards interest. While the monthly mortgage payment for a variable-rate mortgage does not change, the portion going towards interest will change. On the other hand, variable-rate mortgages have a mortgage interest rate that can change. Your principal will be paid off at an increasingly faster rate as your term progresses. Fixed-rate mortgages have an interest rate that does not change. This behaviour can change depending on your mortgage type. This is why your initial monthly payment will have a larger proportion going towards interest compared to the interest payment near the end of your mortgage term. However, since your monthly mortgage payment stays the same, this means that the amount being paid towards your principal will become larger and larger over time. A smaller principal balance will result in less interest being charged. ![]() Your regular mortgage payments will stay the same for the entire length of your term, but the portions that go towards your principal balance or the interest will change over time.Īs your principal payments lower your principal balance, your mortgage will become smaller and smaller over time. When you make a mortgage payment, you are paying towards both your principal and interest.
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