--- title: "Understanding Mortgage Payments Made Easy: How Principal and Interest Work" description: Learn the basics of understanding principal and interest when it comes to making payments on a mortgage loan. This post demystifies how mortgage payments work and provides an easy-to-follow explanation. image: https://pdxdirectrealty.com/hubfs/Imported_Blog_Media/image_89-3.png --- [Skip to content](https://pdxdirectrealty.com/articles/principal-and-interest-demystifying-mortgage-payments#main-content) [![PDX Direct Realty](https://pdxdirectrealty.com/hs-fs/hubfs/Black%20logo%20-%20no%20background-2.png?width=150&height=147&name=Black%20logo%20-%20no%20background-2.png)](https://pdxdirectrealty.com/) - Services Show submenu for Services - [Listing Services](https://pdxdirectrealty.com/listing-services) - [Buyer Services](https://pdxdirectrealty.com/buyer-services) - [Additional Services](https://pdxdirectrealty.com/additional-services) - [About Us](https://pdxdirectrealty.com/about-us) - [Customer Portal](https://pdxdirectrealty.com/customer-portal) Open main navigation Close main navigation - Services Show submenu for Services - [Listing Services](https://pdxdirectrealty.com/listing-services) - [Buyer Services](https://pdxdirectrealty.com/buyer-services) - [Additional Services](https://pdxdirectrealty.com/additional-services) - [About Us](https://pdxdirectrealty.com/about-us) - [Customer Portal](https://pdxdirectrealty.com/customer-portal) - [Contact Us](https://pdxdirectrealty.com/contact-us) [Contact Us](https://pdxdirectrealty.com/contact-us) [All posts](https://pdxdirectrealty.com/articles/all) December 22, 2023 # Principal and Interest: Demystifying Mortgage Payments By  PDX Direct  ·  1 minute read Learn the basics of understanding principal and interest when it comes to making payments on a mortgage loan. This post demystifies how mortgage payments work and provides an easy-to-follow explanation. ## Understanding Principal and Interest Mortgage Payments The first thing to know when it comes to mortgage payments is that they are broken down into two parts: principal and interest. Understanding the difference between principle and interest, and how they each affect your monthly payments, is essential to making informed decisions when it comes to home financing. ## What is Principal? Principal is the amount of money you have borrowed from the lender to purchase your home. Each month, part of your payment goes toward the principal, reducing your overall loan amount. When you pay off the total principal, you will no longer owe money on the loan. ## What is Interest? Interest is the amount charged by the lender for the use of the money that was borrowed. Interest is calculated as a percentage of the loan amount, and is typically higher on fixed-rate loans than adjustable-rate loans. Each month, part of your payment goes toward the interest, with the remainder applied to the principal. ## How Does Principal and Interest Impact Your Monthly Mortgage Payment? The amount of principal and interest that make up your monthly mortgage payment are determined by your loan's term (how long it will take to pay off) and your loan's interest rate (the rate at which interest is charged). In general, the longer the loan term and the higher the interest rate, the more interest you will pay each month. On the other hand, the shorter the loan term and the lower the interest rate, the more of your payment will go towards the principal each month. ## Understanding the Impact of Principal and Interest Having a basic understanding of principal and interest can help you make more informed decisions when it comes to home financing. Knowing how different loan terms and interest rates can affect your monthly payment can help you find the option that best fits your financial situation. ## More Articles to Consider Reading [Pay Off Mortgage Early: Strategies for Financial Freedom](https://pdxdirectrealty.com/articles/pay-off-mortgage-early-strategies-for-financial-freedom) [Mortgage Amortization: The Path to Debt Repayment](https://pdxdirectrealty.com/articles/mortgage-amortization-the-path-to-debt-repayment) [Refinance Mortgage Requirements: What You Need to Know](https://pdxdirectrealty.com/articles/refinance-mortgage-requirements-what-you-need-to-know) [Average Mortgage Payment: Understanding the Norms](https://pdxdirectrealty.com/articles/average-mortgage-payment-understanding-the-norms) [How to Get Rid of PMI: Strategies for Early Elimination](https://pdxdirectrealty.com/articles/how-to-get-rid-of-pmi-strategies-for-early-elimination) [Buydown Mortgage: Lowering Your Initial Interest Rate](https://pdxdirectrealty.com/articles/buydown-mortgage-lowering-your-initial-interest-rate) Share: [facebook-f icon](http://www.facebook.com/share.php?u=https://pdxdirectrealty.com/articles/principal-and-interest-demystifying-mortgage-payments) [linkedin-in icon](http://www.linkedin.com/shareArticle?mini=true&url=https://pdxdirectrealty.com/articles/principal-and-interest-demystifying-mortgage-payments) [twitter icon](https://twitter.com/intent/tweet?url=https://pdxdirectrealty.com/articles/principal-and-interest-demystifying-mortgage-payments) [pinterest-p icon](http://pinterest.com/pin/create/link/?url=https://pdxdirectrealty.com/articles/principal-and-interest-demystifying-mortgage-payments) [envelope icon](mailto:?body=https://pdxdirectrealty.com/articles/principal-and-interest-demystifying-mortgage-payments) [![PDX Direct Realty](https://pdxdirectrealty.com/hs-fs/hubfs/Black%20logo%20-%20no%20background-2.png?width=150&height=147&name=Black%20logo%20-%20no%20background-2.png "PDX Direct Realty")](https://pdxdirectrealty.com/) [List@PDXDirectRealty.com](mailto:List@PDXDirectRealty.com) (503) 847-2199 M-F 8am-5pm PST 3225 SW 87th Ave. #25653 Portland, OR 97225 Our Services - [Property Listing Services](https://pdxdirectrealty.com/listing-services) - [Home Buyer Services](https://pdxdirectrealty.com/buyer-services) - [Business Listing Services](https://pdxdirectrealty.com/contact-us) - [Additional Services](https://pdxdirectrealty.com/additional-services) Company Information - [About Us](https://pdxdirectrealty.com/about-us) - [Contact Us](https://pdxdirectrealty.com/contact-us) - [Terms of Service](https://pdxdirectrealty.com/terms-of-service) - [Privacy Policy](https://legal.hubspot.com/privacy-policy) - [Real Estate Articles](https://pdxdirectrealty.com/articles) **Customer Portal** - [Submit Listing Data](https://pdxdirectrealty.com/submission-options) - [Submit Photos](https://pdxdirectrealty.com/photo-submission) - [Submit Changes](https://pdxdirectrealty.com/submit-changes-form) - [Submit Documents](https://pdxdirectrealty.com/document-submission-form) Copyright © 2026, PDX Direct Realty - All Rights Reserved - Licensed in the State of Oregon ```json { "@context" : "https://schema.org", "@type" : "BlogPosting", "author" : { "@type" : "Person", "name" : "PDX Direct", "url" : "https://pdxdirectrealty.com/articles/author/pdx-direct" }, "dateModified" : "2023-12-22T19:40:07.164Z", "datePublished" : "2023-04-04T07:00:00.000Z", "headline" : "Understanding Mortgage Payments Made Easy: How Principal and Interest Work", "image" : [ "https://pdxdirectrealty.com/hubfs/Imported_Blog_Media/image_89-3.png" ], "mainEntityOfPage" : { "@id" : "https://pdxdirectrealty.com/articles/principal-and-interest-demystifying-mortgage-payments", "@type" : "WebPage" }, "publisher" : { "@type" : "Organization", "logo" : { "@type" : "ImageObject", "url" : "https://pdxdirectrealty.com/hubfs/Color%20logo%20-%20no%20background.png" }, "name" : "PDX Direct Realty" } } ``` ```json { "@context" : "http://schema.org", "@type" : "Article", "author" : { "@type" : "Person", "name" : [ "PDX Direct" ] }, "datePublished" : "2023-04-04T07:00:00+0000", "description" : "Learn the basics of understanding principal and interest when it comes to making payments on a mortgage loan. 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