The Crossover Year: where your mortgage payment really goes

Every mortgage payment is one number on a statement, and that one number hides four very different things. Part of it buys you a slightly bigger share of your own house. Part of it pays the lender for the use of their money. The rest, held in escrow, goes to the county and the insurer and buys you nothing you can sell. This guide takes those four parts apart, shows how the mortgage rate, the down payment and the price set the proportions, and then does what no other explainer does: it puts real numbers on the twelve Sun Belt metros we cover, using public data and this week's rate.

The headline fact is simple and almost nobody knows it. On a 30-year fixed-rate mortgage at 7.4% (the Freddie Mac Primary Mortgage Market Survey® reading for the week of Oct 15, 2026), the first payment that puts more toward your principal than toward the lender's interest is month 249: year 21 of the loan. At the 3% rates buyers locked in early 2021, that crossover came in month 84, year seven. The year it happens depends only on the rate and the term. It does not depend on the price of the house, the size of the loan or where the house is.

The payment is not the price

A fixed-rate mortgage is a schedule of equal payments. Each payment first covers the interest due on whatever you still owe, and whatever is left reduces the balance. Because the balance is largest at the start, the interest bite is largest at the start, and the slice that reaches your principal is smallest. As the balance falls, the interest due falls, and the same payment retires more principal each month. That is the whole mechanism. Everything in this guide follows from it.

Two more things ride along with the payment. Property tax and homeowners insurance are usually collected monthly into an escrow account, so the number you actually send is principal plus interest plus taxes plus insurance, the "PITI" that lenders quote. Below a 20% down payment, private mortgage insurance is added too. None of those three reduce the loan, and unlike the principal-and-interest part, none of them are fixed for 30 years.

Our worked example throughout is a $400,000 home bought with 10% down, which is the median down payment for first-time buyers in the National Association of Realtors' 2025 Profile of Home Buyers and Sellers (our Jacksonville first-time-buyer piece looks at what that buys in one metro) (repeat buyers put down a median 23%; across all mortgaged purchases Redfin measured 15% in March 2026). That leaves a $360,000 loan. At 7.4% the principal-and-interest payment is $2,493 a month, and in the first twelve months $26,527 of the $29,911 you pay is interest. Just $3,384 becomes equity.

The crossover year

There is a clean formula for the crossover. Write r for the monthly rate (the annual rate divided by twelve) and n for the number of payments. Principal exceeds interest for the first time at payment number

k = ⌈ n + 1 − ln(2) ÷ ln(1 + r) ⌉

The loan amount is not in it. Double the loan and you double both the payment and the interest, so the month they cross is unchanged. That is why Figure 1 can be drawn once and read by every borrower.

The curve is steep where it matters. At 3% the crossover is year 7; at 5% it is year 17; at 6.5% it is year 20; at 7.4% it is year 21. Rates moved from a survey-record low of 2.65% in the week of January 7, 2021 to 7.79% in October 2023, and have ranged between 5.98% and 7.40% so far in 2026 (Freddie Mac PMMS, weekly; note the survey switched to an application-based method in November 2022). What that jump did to supply, by locking owners into their old rates, is the subject of our Sun Belt affordability analysis. In crossover terms, that is the difference between a borrower who starts building equity faster than they pay interest within seven years of closing, and one who does so only after two decades.

A 15-year loan crosses in month 69, year 6, at 7.4% (month 53 at 6.5%), because the larger payment retires principal from the start. That is the real argument for the 15-year term, and we return to it in the section on shortening the horizon.

Where each dollar goes over thirty years

Figure 2 is the picture the Federal Reserve Board used to teach amortization, redrawn for today's rate. In the Fed's example, a $200,000 loan at 5.9%, the principal share of the year's payments was 17.6% in year one, 40% in year fifteen, 53% in year twenty and 97% in year thirty; our schedule reproduces those figures to within a point. At 7.4%, 89% of the first year's payments is interest, against 82% in the Fed's 5.9% example.

Cumulative interest tells the same story from the other side. On the $360,000 loan at 7.4%, you will have paid $129,837 in interest after five years, $250,878 after ten, $359,200 after fifteen and $449,128 after twenty, for a lifetime total of $537,324, which is 1.49 times the amount borrowed. After ten years of payments the balance is still $311,770.

Two caveats keep this honest. First, the payment is fixed in nominal dollars, so inflation quietly shrinks it: with consumer prices rising 3.4% in the year to August 2026 (BLS CPI-U), the real rate on a 7.4% mortgage is about 3.9%, and the payment that feels heavy today will feel lighter in year ten as wages and rents move up around it. Second, interest is a cost, not a loss; the alternative to paying it is paying rent, and section six puts a real rent next to it.

One point of rate

Around today's rate, one percentage point of rate changes the payment by about 10%. The $360,000 loan costs $2,252 a month one point below today's rate and $2,743 one point above it. Turned around, the same $2,493 payment carries a $398,488 loan one point lower (10.7% more house) and only $327,178 one point higher (9.1% less). This "one point is ten percent" rule is widely repeated, and at today’s rate it is roughly right.

Two things the rule leaves out. The rate moves only the principal-and-interest part; property tax, insurance and PMI are set by the price and the place, and do not fall when rates do. And a rate can be changed later by refinancing, at a cost and only if rates cooperate, whereas the price is permanent and sets the base for everything else. "Date the rate, marry the house" is a bet on a refinance, not a free option.

The down payment's two jobs

The down payment does two things. It shrinks the loan, which shrinks every payment in Figure 2 proportionally. And it sets the loan-to-value ratio, which decides whether you pay for private mortgage insurance and for how long. PMI protects the lender, not you; on a conventional loan it runs at roughly 0.36% to 0.84% of the original loan per year (Freddie Mac puts it at $30 to $70 a month per $100,000 borrowed), which on the $360,000 loan is $108 to $252 a month.

The Homeowners Protection Act fixes when it ends. You may ask the servicer to cancel PMI once the scheduled balance reaches 80% of the original value, if your payments are current; the servicer must cancel it automatically at 78%; and it ends at the midpoint of the term regardless. By scheduled amortization alone, at 7.4% a 10%-down borrower reaches 80% in month 105 and 78% in month 120. With 3% down the automatic cutoff is month 156; with 5% down, month 147. FHA loans run on a different rule entirely: with 3.5% down the annual premium is 0.55% of the balance for the life of the loan, and only borrowers with at least 10% down see it end after eleven years (HUD Mortgagee Letter 2023-05).

Figure 4 is the schedule's version of events. Figure 5 is what actually happened, for three cohorts of buyers who each put 10% down on the median home in their metro and locked the average 30-year rate of their purchase quarter: 3.00% in the spring of 2021, 5.27% in the spring of 2022 and 6.51% in the spring of 2023. Each started at 90% loan-to-value. We let each balance amortize on schedule and move each home's value with its metro's FHFA House Price Index, quarter by quarter, to the latest reading. By amortization alone the three cohorts would reach 80% of the original value in months 61, 82 and 95 respectively.

Purchase timing dominates everything else in the chart. Measured against today's value, the 2021 cohort's loan fell below 80% in every one of the twelve metros by Q1 2022 and has stayed there, on appreciation alone. The 2022 cohort, who bought at or near the price peak, stands below that line today in nine of the twelve; in Austin, San Antonio and Phoenix it has not happened. The weakest case is Austin's buyer, with prices 11.3% below their Q2 2022 level, owes 95.3% of what the home is worth today, more than on closing day. The 2023 cohort has had three years, and stands below the line today in three of its twelve metros.

Crossing the line is not the same as cancelling PMI. The Homeowners Protection Act's 80% request is measured against the original value, which by schedule alone the 2022 cohort reaches in month 82. Cancelling on today's value is a servicer rule (Fannie Mae Servicing Guide B-8.1-04): a new valuation, at least two years of payments, and a loan at or below 75% of current value until the fifth anniversary, 80% after it. On that test the loan qualifies today in four of the 2022 cohort's twelve metros, and in none of the 2023 cohort's. Appreciation can bring the date forward; a price decline can push it past the schedule; and which of the two happens is decided mostly by when a buyer closed, not where.

The money that never touches the loan: twelve metros

This is the study at the centre of the guide. For each of the twelve metros our 2026 Sun Belt Housing Market Report ranks, we take the median value of an owner-occupied home from the Census Bureau's American Community Survey (2024, the latest 1-year estimate), assume 10% down and this week's 7.4% rate, add the metro's median property-tax bill from the same survey, and add the state's average homeowners-insurance premium. Then we ask a single question: of every dollar a first-year owner pays, how many cents become equity?

The answer runs from 10.2¢ in Phoenix to 8.1¢ in Jacksonville. The ordering is driven by the escrow, not the loan. In Phoenix, with an effective property-tax rate of 0.40% and modest insurance, property tax plus insurance roughly equals the first year’s principal (1.01×). In Houston, where the effective rate is 1.45%, the escrow is 3.35× the first-year principal; in Tampa, where property tax is moderate but insurance is the highest of the six states, it is 3.46×. In every Texas and Florida metro the county and the insurer collect between 2.8 and 3.5 times what the owner pays themselves in year one; the Houston vs Phoenix and Phoenix vs Tampa comparisons put the two tax regimes and the two insurance markets side by side.

Insurance is the weakest number in the table, and we show it two ways. The bars use current quoted rates from Insurify's March 2026 price-projection report (Florida $8,458 a year, Texas $4,529, Arizona $2,142). The insurance regulators' association (NAIC), whose averages of premiums actually paid are published by the Insurance Information Institute, runs years behind and put Florida at $2,677 for 2022, about 3.2 times lower. Recomputed on those figures the range runs from 10.5¢ (Phoenix) to 8.7¢ (San Antonio) and seven of the twelve metros change rank, the largest move being Tampa from 11th to 7th; the Florida levels move a great deal (Figure 7 shows the range), and anyone quoting this chart should say which source they are quoting.

The comparison that makes the chart useful is in the last column of its table. HUD's Fair Market Rent for a two-bedroom apartment, the benchmark the housing-voucher program uses, is $18,876 a year in Houston and $23,724 in Tampa. The first-year money that builds no equity for the median-home owner, interest plus tax plus insurance, is $30,991 in Houston and $37,025 in Tampa (Houston vs Tampa compares the two on rent, income and cost of living). A two-bedroom rental and a median single-family home are not the same product, and the owner is also paying for a larger home and for the chance of appreciation, so this is not a rent-versus-buy verdict. It is the honest size of the "renting from the bank" phase.

Your fixed payment is not fixed

The principal-and-interest payment on a fixed-rate mortgage never changes. The escrow does. Property-tax bills follow assessed values with a lag (Florida's Save Our Homes cap and Texas's homestead exemption slow that for primary residences, as our calculator page explains), and insurance premiums have repriced sharply since 2022, with Florida's Citizens flood-insurance mandate adding a further line from 2027. Figure 7 brackets the share of the monthly payment that is tax and insurance in each metro using the two insurance sources we have: the 2022 average premiums compiled by the insurance regulators' association (NAIC), as published by the Insurance Information Institute, and Insurify's 2026 quoted-rate estimate. The gap between the two dots mixes a real four-year run-up in premiums with a difference in method, actual premiums paid against quotes for a standardised policy, so read it as a range rather than a measured change. In the Florida metros that range runs from 16% of the payment to 29%.

This is why a payment that was "fixed" at closing can rise by hundreds of dollars a month at the escrow analysis a year later, and why a budget built on the principal-and-interest figure alone is incomplete in the Sun Belt in a way it is not in, say, Ohio.

The no-income-tax trade

Eight of our twelve metros sit in states with no tax on wages: all four Texas metros, all three Florida metros and Nashville. The usual claim is that the tax saving pays for the housing costs. Figure 8 tests it with the two numbers side by side: what the state would collect at the metro's median household income (the flat rate on income above the state's standard deduction for a joint return; a single filer would owe more), and what the median home collects in property tax and insurance.

In Austin the state collects nothing on wages and the median home collects $11,425 a year in tax and insurance. In Raleigh the state collects $3,058 at the median income and the home collects $6,157, a difference of $3,099 (the Austin vs Raleigh comparison carries both tax rows). The two ranges overlap: housing carry in the eight no-income-tax metros runs from $5,234 (Nashville) to $11,470 (Orlando), while income tax at the median plus housing carry in the four taxed metros runs from $5,473 (Phoenix) to $9,532 (Atlanta). The no-tax states are not uniformly cheaper on this measure; what some collect through the paycheck, others collect through the house. For a two-earner household well above the median, the arithmetic tilts toward the no-tax states; for a household on a modest fixed income in a median home, it tilts the other way. The chart lets you place yourself.

Shortening the horizon

Four common strategies, each measured against the 30-year schedule on the $360,000 loan at 7.4%.

Adding $200 a month to principal pays the loan off in 23.7 years and avoids $135,212 of interest. Any recurring extra principal works the same way, and nothing obliges you to keep doing it.

The biweekly plan, half a payment every two weeks, is the same idea in disguise. Twenty-six half-payments are thirteen full payments a year, so it is simply an extra month's payment annually, which pays off in 23.4 years and saves $138,884. The fortnightly timing itself adds comparatively little; the thirteenth payment does nearly all of it. The identical result is available at no cost by adding one twelfth of the payment to each month. Paid "biweekly programs" that charge enrollment and transaction fees for this were the subject of Consumer Financial Protection Bureau enforcement actions in 2015.

A $10,000 prepayment at closing shortens the loan by 2.8 years and avoids $72,692 of interest. Note that the present value of the payments it removes, discounted at the mortgage rate, is exactly $10,000: prepaying earns exactly the loan's rate, pre-tax, with no market risk and no liquidity, and no more than that. Whether that exceeds what the same cash could earn elsewhere depends on the rate on the loan and on the alternative, which is why a 2021 borrower at 3% and a borrower at today's 7.4% reach opposite answers.

The 15-year term is the structural version. At the same 7.4% rate the payment rises to $3,317 and lifetime interest falls to $237,028; 15-year rates usually run lower than 30-year rates (0.68 points lower in the week of October 1, 2026), which makes the real case stronger than Figure 9 shows. Paying discount points is a different trade: one point costs 1% of the loan up front for roughly a quarter-point lower rate, with a break-even of four to five years on this loan, and Freddie Mac's research found that the 58.8% of 2023 purchase borrowers who paid points paid a higher rate on average (6.86% against 6.69%) than those who did not. Builder "2-1 buydowns", which cut the rate by two points in year one and one point in year two, cost the builder about 2.4% of the loan; the same money as a permanent buydown would take roughly 0.59 points off the rate for the life of the loan, at the usual quarter point per point: a payment of $2,349, above the 2-1’s $2,022 in year one and above its $2,252 in year two, then $144 a month below the note-rate payment from year three on. With 66% of builders offering incentives in September 2026 (NAHB), builders will usually quote either structure on request.

Figure 10 is the whole loan at a glance from the borrower's seat: 360 payments, shaded by how much of each was yours.

Eight things people get wrong

"You pay mostly interest for thirty years." Within a single payment, interest exceeds principal only until month 249 at today's rate, and only until month 84 at 3%. Cumulatively, the picture is different: at today’s rate they never cross: total interest ($537,324) exceeds the $360,000 borrowed, so the interest paid so far stays ahead of the principal paid so far for the whole life of the loan. Both statements are true; they answer different questions.

"Biweekly payments save a fortune." They save exactly what one extra payment a year saves, and the same result is available at no cost by adding one twelfth of the payment to each month.

"Always buy points." The points pay back only for a borrower who keeps the loan past the break-even without refinancing, and in Freddie Mac's 2023 data the borrowers who paid points still carried a higher average rate than those who did not.

"You need 20% down." The median first-time buyer put down 10% in 2025. Twenty percent avoids PMI, which is a cost, not a barrier; Figure 5 shows how appreciation can bring the cancellation date forward on the servicer's current-value test, and how a price decline can push it past the schedule.

"Paying off early is always optimal." It avoids interest at exactly the loan's rate, with no market risk but no liquidity. Whether that beats the alternatives depends on the rate on the loan and on what the cash would otherwise earn.

"The rate matters more than the price." One point of rate is about 10% of payment, and roughly as much buying power (10.7% more house one point lower, 9.1% less one point higher). But the rate can be refinanced and the price cannot, and the price sets the tax, insurance and PMI base.

"Tax and insurance are rounding errors." In the Texas and Florida metros they are between 24% and 29% of the monthly payment and between 2.8 and 3.5 times the first-year principal.

"FHA mortgage insurance drops off like PMI." Only with at least 10% down, and then after eleven years. At 3.5% down it lasts the life of the loan.

Method, data and licence

Every figure on this page is computed at build time from the inputs below by one shared module, the same code that runs the site's mortgage calculator, and checked against published tables (the Federal Reserve Board's 5.9% example, SmartAsset's 2021 crossover months) and a month-by-month schedule before any deploy. Payments use the standard level-payment formula; balances and cumulative interest use the closed forms; schedules with extra principal are simulated month by month. Property tax is the ACS median paid divided by the ACS median value (an effective rate, not a statutory one, and a ratio of medians). The mortgage rate is read from the Freddie Mac Primary Mortgage Market Survey through FRED each day the page is rebuilt, so the live figures move with the market while the static tables under each chart are dated.

Every chart on this page, and the data table under it, is published under Creative Commons Attribution 4.0. You may reproduce, adapt and embed them, including in commercial publications, provided you credit SunBeltPulse and link to this page (sunbeltpulse.com/mortgage-math) and state the period of the rate you are quoting. The licence covers SunBeltPulse's charts, captions and compilations. Third-party figures identified in a source line remain their publishers': the underlying government series are public domain; Freddie Mac states that information from its PMMS release may be used with proper attribution to Freddie Mac; Insurify's premium estimates and the NAIC averages published by the Insurance Information Institute are cited here, not relicensed, and should be credited to their publishers if you quote them. If you use a figure in a story, we would like to know: see the contact page.

Sources

• Freddie Mac, Primary Mortgage Market Survey® (weekly); distributed through FRED as MORTGAGE30US and MORTGAGE15US.
• Federal Housing Finance Agency, House Price Index (quarterly, all-transactions, by metro).
• U.S. Census Bureau, American Community Survey 1-year estimates (median home value B25077, median real-estate taxes B25103, median household income B19013).
• U.S. Department of Housing and Urban Development, Fair Market Rents and Mortgagee Letter 2023-05 (FHA mortgage insurance premiums).
• Consumer Financial Protection Bureau, When can I remove private mortgage insurance from my loan? (Homeowners Protection Act thresholds).
• Freddie Mac, Breaking down PMI (premium range) and More borrowers are paying discount points (2024 research).
• Board of Governors of the Federal Reserve System, Amortization of a $200,000 loan for 30 years at 5.9%.
• SmartAsset, When do homeowners pay more in principal than interest? (2021 crossover table).
• National Association of Realtors, 2025 Profile of Home Buyers and Sellers (press release, Nov 2025).
• Redfin, Down payments fall (March 2026 data).
• Insurify, Home insurance price projections (updated March 2026).
• Insurance Information Institute, Facts + statistics: homeowners and renters insurance (NAIC 2022 average premiums).
• National Association of Home Builders, Housing Market Index, September 2026 (builder incentives).
• Bankrate / LodeStar, Average closing costs by state (2025).
• U.S. Bureau of Labor Statistics, Consumer Price Index (August 2026 release).
• Tax Foundation, One Big Beautiful Bill Act provisions (mortgage-interest cap made permanent); Internal Revenue Service, Revenue Procedure 2025-32 (2026 standard deduction).
• State revenue departments for the six state income-tax rates, listed with their sources in the method table above.

This guide is general information about mortgage arithmetic, not financial, tax or legal advice. The 2025 federal tax law made the $750,000 cap on deductible acquisition debt permanent, but the 2026 standard deduction is $32,200 for joint filers, which first-year interest on this loan ($26,527) does not clear on its own; whether any of this changes your return is a question for a tax professional.