Interest Due

Definition of 'Interest Due'


The portion of a current mortgage payment that is comprised of interest on the remaining principal amount. In a standard amortizing mortgage, the first payments will go mainly toward interest due, with only a small percentage of the payment going toward reducing the principal amount. When the next monthly payment comes around, the interest due will be calculated on the updated principal amount, which will have decreased slightly from the prior month's payment.

As time progresses, the interest due each month should fall as a percentage of the monthly payment, with more money going toward reducing the principal.

Investopedia explains 'Interest Due'


If a borrower has signs on for an "interest-only" mortgage, the entire monthly payment will only be covering the interest due on the loan, with a balloon payment expected to pay down the entire principle amount at the very end. These types of mortgages are entered into with the expectation of being able to refinance the entire loan before the balloon payment is due.

As long as real estate prices are rising, this model works well as there will be equity value built up in the home, which can be accessed when refinancing the debt. If, however, real estate prices are flat or falling, then the option to refinance won't be available, and the borrower may face foreclosure of the home or a balloon payment that they may not be able to afford.


Filed Under: ,

comments powered by Disqus
Hot Definitions
  1. Takeover

    A corporate action where an acquiring company makes a bid for an acquiree. If the target company is publicly traded, the acquiring company will make an offer for the outstanding shares.
  2. Harvest Strategy

    A strategy in which investment in a particular line of business is reduced or eliminated because the revenue brought in by additional investment would not warrant the expense. A harvest strategy is employed when a line of business is considered to be a cash cow, meaning that the brand is mature and is unlikely to grow if more investment is added.
  3. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will be executed at a specified price (or better) after a given stop price has been reached. Once the stop price is reached, the stop-limit order becomes a limit order to buy (or sell) at the limit price or better.
  4. Pareto Principle

    A principle, named after economist Vilfredo Pareto, that specifies an unequal relationship between inputs and outputs. The principle states that, for many phenomena, 20% of invested input is responsible for 80% of the results obtained. Put another way, 80% of consequences stem from 20% of the causes.
  5. Pareto Principle

    A principle, named after economist Vilfredo Pareto, that specifies an unequal relationship between inputs and outputs. The principle states that, for many phenomena, 20% of invested input is responsible for 80% of the results obtained. Put another way, 80% of consequences stem from 20% of the causes.
  6. Budget Deficit

    A status of financial health in which expenditures exceed revenue. The term "budget deficit" is most commonly used to refer to government spending rather than business or individual spending. When referring to accrued federal government deficits, the term "national debt” is used.
Trading Center