It isn't that you're paying for just interest, it is that the loan is so large and stretched out over such a large period, that the monthly interest comes out to about the minimum payment for the first few years.

If you have a $100,000 loan for a 20 year period (ridiculous, I know) with 5% interest, then you'd have to pay $5000 in interest that first year before paying any of the principal. So if you're paying $500 a month, you've paid off $1000 on your loan, reducing the principle to $99,000. As the principle gets smaller, so does the interest, but since you still pay $500 a month, the principle gets reduced at a constantly accelerating pace.

So yeah, those first 5 years you might pay 18k in interest and 7k in principle. Refinancing reduces the payment amount based on the new principle, but will start the above mentioned pattern over.

All refinancing does is make your short term more enjoyable by stretching out your debt over more years. Don't do it unless you have to. I'd rather spend 5 years getting by and 10 years debt free than 15 years paying a little.

1) On a forward mortgage the interest is paid on the outstanding balance at the end of each period. Because the balance is larger at the beginning, the amount you pay for interest is higher, however, you pay interest throughout the life of the loan. There are different reasons to refinance a loan and it is a personal decision. Some people want to lower their monthly payments by extending the life of the loan or take out some of the equity they have in the property.

In the case of refinancing with a reverse mortgage, you could be able to stop making mortgage payments and increase your cash flow. Interest is accrued on the outstanding balance and although you are not required to pay it while you live in the house, you can choose to pay the interest only every month.

2) Some people face situations where their best option is to refinance a loan, their incomes could have reduced or an unexpected event or emergency requires them to take some of the equity from their homes. In other cases, people who have adjustable rate mortgages want to refinance into a fixed rate mortgage. It should be your personal decision to refinance your home. After you decide you should notify your bank, if you choose not to refinance let them know you are not interested at the time.