What payment structure is typical in the early years of a fixed mortgage?

In the early years of a fixed mortgage, the typical payment structure is characterized by high interest and low principal payments. This structure arises from the way amortization works in fixed-rate mortgages.

During the initial stages of the loan, a larger portion of the monthly payment is allocated to interest because the total amount owed (the principal) is still quite high. As the borrower continues to make payments, the principal gradually decreases, which in turn reduces the amount of interest charged on the remaining balance. Over time, as the outstanding principal decreases, more of each payment goes toward reducing the principal balance.

This model ensures that lenders receive more of their interest earnings in the early years of the loan, which is beneficial for them from a risk perspective as they recover some of the risk associated with lending significant amounts of money upfront. This structure contrasts with equal payments or payments that only cover interest, which do not reflect the amortization process typically found in fixed mortgages.