On a traditional 30 or 15 years fixed rate mortgage program that involves principal and interest, each payment made is divided into two parts (we’re not including taxes or homeowners insurance as part of this discussion):
The first part of the mortgage payment, which is commonly referred to as principal, goes to paying down the initial amount borrowed.
The second part is the interest paid for the money borrowed to purchase the property.
The amount paid in interest decreases each month, as the amount paid towards the principal balance increases. This apportioning is referred to as amortization.
Other types of mortgage payments available can include options for paying interest only or a teaser rate.
Either way, it is extremely important to have a solid understanding of the full payment and terms before moving forward with a particular option.