Interest
Direct definition
The cost of borrowing money, expressed as a percentage of the outstanding balance.
Written by the Vabasso Mortgage Editorial Team · Reviewed against agency and federal sources · Read our editorial policy for how we research and review mortgage content
Plain-English explanation
Mortgage interest is calculated on the remaining balance each month. Early in a loan, most of your payment is interest; that shifts to principal over time.
Why it matters
Interest is the largest single expense of most mortgages over their life.
Where you may see it
- Mortgage statement
- Amortization schedule
- Closing Disclosure
A real-world example
The first month of a $400,000 loan at 6.5% owes about $2,167 in interest.
Educational and illustrative only
A common misunderstanding
Interest is not charged on the original loan amount for the life of the loan — it's calculated on the remaining balance each month.
Ask Vabasso AI
This glossary provides general educational information. Mortgage terminology, qualification methods, forms, timelines, fees, program rules, and legal meanings may vary by lender, investor, loan program, property, occupancy, state, and transaction. Definitions do not represent loan approval, legal advice, tax advice, or a commitment to lend.
- Author
- Vabasso Mortgage Editorial Team
- Reviewed by
- Vabasso Mortgage Licensed Advisory Team
- Last reviewed
- July 30, 2026