Learn the concepts

When you take a mortgage, your monthly payment is fixed (for a fixed-rate loan) and split into two parts: interest and principal.

In the early years, most of your payment goes to interest — the bank charges you for the use of their money. Only a small slice reduces the loan balance (principal).

Over time this flips. As the balance falls, less interest accrues each month, so more of your fixed payment chips away at the principal. This process is called amortization.

Example: A €315,000 loan at 3% for 30 years gives a monthly payment of about €1,328. In month 1, roughly €788 is interest and €540 is principal. By year 20, it's about €450 interest and €878 principal.

The total interest paid over 30 years is ~€163,000 — more than half the original loan. This is why interest rate and loan term matter so much.