Mortgage loans are usually of extremely high amounts and it is for this reason that the repayment time of the loan is very long, such as fifteen or even thirty years. At the opening stages of the repayment of the loan, a large part of the amount usually comprises of the interest and comprises of far less principal. As the life of the mortgage gradually comes to an end, the interest that requests to be paid keeps decreasing and the amount of principal keeps increasing. This is because the interest is based on the amount pending to be paid back, which progressively decreases as the amount owed to the lender decreases. During the repayment period, if the borrower fails to pay up at least twenty percent of the amount, the lender considers the loan to have become risky and needs the borrower to pay up another amount known as the escrow amount which is in turn used to pay for tax and insurance in future, on the loan.

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