What Is a Mortgage?
A mortgage is a type of loan used to purchase real estate (for most people, their home). The property itself serves as collateral for the loan. Monthly payments typically include two parts: principal, which reduces the original loan balance, and interest, which is the cost of borrowing from the lender.
Mortgages are commonly structured as amortising loans, meaning the monthly payment overall amount stays the same over time but the portion that gets allocated to interest and principal changes. Early in the loan term, most of your payment goes toward interest because the outstanding balance of the loan is high. As you pay down the principal amount, the loan balance decreases, and since interest is calculated on that balance, your interest expense also drops, while a greater share of your payment contributes to building home equity.
Mortgage Rates Right Now
According to The Wall Street Journal, mortgage refinancing activity is starting to thaw as interest rates trend lower. The average 30-year fixed mortgage rate recently dipped to 6.56%, marking a 10-month low and encouraging homeowners with higher-rate loans to reconsider refinancing.¹
Why This Matters
Understanding how mortgage payments are structured and how they shift over time can help homeowners make smarter decisions. As interest rates fall and loan balances drop, refinancing or adjusting payment strategies can significantly reduce interest costs and accelerate equity growth.
Refinancing simply means replacing your current mortgage with a new one, often at a lower interest rate in order to reduce payments or change the terms of the loan.²
The views expressed here are my personal opinions and experiences. This content is for informational purposes only and should not be taken as financial advice. Please consult a licensed financial advisor before making investment decisions.
Eisen, B., & Dagher, V. (2025, August 30). Mortgage Refinancing Starts to Thaw as Rates Trend Down. The Wall Street Journal. https://www.wsj.com/personal-finance/mortgages/mortgage-refinancing-starts-to-thaw-as-rates-trend-down-25ad4ae7?gaa_at=eafs&gaa_n=ASWzDAgNO4AGbnHbG98Zh02aBWz
Kagan, J. (n.d.). Mortgage rate: Definition, types, and determining factors. Investopedia. https://www.investopedia.com/terms/m/mortgage-rate.asp
