Why does my mortgage payment look like it's declining each year?

Let’s walk through an example scenario to understand why your mortgage payment looks like it’s getting smaller over time.

Example Scenario

For this example, assume you own a home with the following details:

• Purchase Price: $400,000
• Current Value: $500,000
• Current Balance: $325,000 remaining at an Annual Percentage Rate (APR) of 6%
• Interest compounding daily
• Monthly payment: $2,050 ($24,600 annually)

Viewing Housing Costs

In your Plan, click on Spending or select Expenses from the dropdown menu. If Display Options > Inflation is set to Today’s Currency (adjusted for inflation), your Housing cost bar graph will appear to decrease year over year.

To view housing costs in nominal terms (not adjusted for inflation), toggle Display Options > Inflation to Actual Currency.

Breaking Down Housing Expenses

To see a further breakdown of your housing costs, such as House Maintenance, House Mortgage, Property Tax, and House Insurance:

1. Open the Summary Panel to the right of the plot.
2. Click Expenses. A list will appear with your expenses ranked from highest to lowest.
3. Click any individual expense to plot a bar or line graph showing House Mortgage (Principal), House Mortgage (Interest), and more.

You can toggle between Today’s Currency and Actual Currency here as well.

Why the Payment Looks Like It’s Declining

In this example, you’re paying $24,600 annually toward your mortgage. With Display Options > Inflation set to Today’s Currency, next year’s payment will show as approximately $24,000 and continue to decrease each year. With Actual Currency selected, the payment will show as $24,600 each year until the mortgage is paid off.

Your mortgage payment isn’t actually declining. The apparent decrease is simply a result of the inflation-adjusted view.