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I have a house loan at a 4.25% fixed APR rate with CitiMortgage. Comparing the total amount of interest I've paid recently, per Citibank's statement I paid $6684 in interest during year one of the loan, $6800 the next year, and $7086 in year 3--all as the principle owed amount is decreasing over time. Why would I be paying more total interest each year, instead of less or same amount over time? I know that the monthly payments are the same, but shouldn't the paid-as-interest portion decrease and the paid-on-principle portion increase over time?

  • That would be a good question for Citibank. For a fixed-rate loan whose principal is, indeed, decreasing as you make payments, the total interest should be going down. – chepner Feb 11 at 19:11
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    A lower first year can make sense since it is typically a partial year, but the higher 3rd year does not make sense. – Hart CO Feb 11 at 19:13
  • What does your amortization schedule look like? You should be able to add up the numbers there and get your theoretical totals per annum. Also be sure to check up on your statements for anomalies. – CKM Feb 11 at 19:16
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    In addition to calling the bank, all the statements should be available to you, so you can see for yourself what's going on with these. Each statement details exactly how much you pay and for what. – void_ptr Feb 11 at 19:17
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    Are you by chance paying extra? Some banks will apply extra payments as "Future Payments" rather than principal reduction. If this is the case, you are prepaying interest that hasn't accrued which can make it appear your interest is increasing, when actually it's just in how the bank applies the payment. I have to correct my mortgage lender every month on this. You should be able to find on your bank's site how the payment breakdown is being applied. If they are applying it to future payments, then call and have them go back through to correct it. – Adam Klump Feb 11 at 19:45

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