What Makes Up Your Mortgage Payment? Purchasing a home is a dream for everyone and understanding your mortgage payments will help you in keeping on track and pay down your mortgage in less time. Your mortgage payments are made up of principal payments and interest payments. The principal payments go directly to pay off your outstanding loan amount and the interest payments pay your interest of the loan. Depending on your mortgage, a certain amount will be paid to the principal and a certain amount will be paid to the interest. Sometimes your mortgage payment will also consist of your property tax payment. A principal payment is the amount borrowed from the lender, minus the amounts repaid to the lender, and which have been applied to the reduction of principal. As monthly mortgage payments are made, the principal is reduced. Making one additional monthly payment per year will reduce the principal enough to pay the mortgage off sooner Interest payments is the monthly percentage added to each mortgage payment and are only pay off the amount of interests that has occurred. A reminder that Interest is the money a lender or bank earns or charges on the money they loaned to homebuyers.