Equity vs interest in rental property
When you are paying for your mortgage, does that amount paid go in a fixed percentage to your equity and interest in a yearly basis, or it goes first only towards paying the interest that the bank charges?
For example if you buy a house and put $40,000 down payment, and the mortgage is $1,300 monthly (including 3% interest and $400 taxes per year). After a year you have paid $15,600 total. Does this mean that your equity is now $14,732 ($15,600 - interest - taxes) more in the house ($55,600 total)? Or the bank charges you interests in advance (meaning that a bigger % of the 15,600 goes to the bank instead of toward your equity).
I ask because I am looking to buy a property and in case I sell it after one or two years I would like to have increased equity and not just paid interest to the bank.
Javier