Where Your Monthly Payment Goes
Each month, you’ll make a monthly payment to your lender that will go toward paying back the amount you borrowed (commonly called the principal), plus interest. Your monthly payment may also include mortgage insurance.
Your mortgage statements will show how your payment is broken up. Initially, the bulk of your payment will go toward paying down the interest on the loan, but over time, more of your payment will go to paying down the principal balance.
If you have an escrow account on your loan, part of your payment will go there. The amount of money that’s added to your payment for escrow depends on the amount of your taxes and insurance premiums. Your lender will analyze your account each year to make sure they’re collecting the appropriate amount of money, and they’ll adjust your payment if they’re collecting too little or too much.