On a loan of 200,000 at 6% a year over 20 years, the monthly payment is 1,432.86. In the first month, 1,000.00 of it is interest, 69.8% of the payment. In the last month, 7.13 is.
Each payment first covers the interest due on the balance still owed, and the rest repays the loan itself. As the balance falls, the interest due falls with it, so more of every payment goes to repaying the loan.
The first and last payments
The same payment, split at the start of the loan and at the end:
| Payment | Total | Interest | Repays the loan |
|---|---|---|---|
| First | 1,432.86 | 1,000.00 | 432.86 |
| Last | 1,432.86 | 7.13 | 1,425.73 |
Why the split changes
Each month’s interest is the balance still owed multiplied by the monthly rate. The payment stays the same, so whatever the interest does not take repays the loan, and the balance falls a little faster each month than the month before.
These figures follow from the stated loan amount, rate and term. A real loan can differ: the rate can change, fees can be added, and lenders round each payment in their own way.