What is an amortization schedule?
Amortization is the process of paying off a loan with equal payments over a set term. An amortization schedule shows how each payment splits between interest and principal, and the balance left afterward.
How the schedule is calculated
The payment stays the same each month, but the split changes:
- Interest = remaining balance × yearly rate ÷ 12.
- Principal = payment − interest.
- New balance = old balance − principal.
Worked example
On a $320,000 loan at 6.5% over 30 years, the payment is $2,023. In the first month about $1,733 is interest and only about $289 is principal. As the balance falls, the interest share shrinks and the principal share grows. Total interest over 30 years is about $408,000.
Why the early years are mostly interest
Interest is charged on the full balance, which is largest at the start. This is why extra payments in the first years shorten a loan so much. Test it with the mortgage payoff calculator.
How to use this calculator
Enter the loan amount, the interest rate and the term. The amortization schedule calculator shows your monthly payment, the total interest and a yearly table of principal, interest and remaining balance. Use the balance column to see what you would still owe at any point, for example when you plan to sell or refinance.
More examples: the same loan year by year
This table follows the $320,000 loan at 6.5% over 30 years from the worked example. Each row shows one full year of payments, which add up to about $24,271.
| Year | Interest paid that year | Principal paid that year | Balance at year end |
|---|---|---|---|
| 1 | $20,695 | $3,577 | $316,423 |
| 5 | $19,636 | $4,636 | $299,555 |
| 10 | $17,861 | $6,410 | $271,284 |
| 15 | $15,407 | $8,864 | $232,189 |
| 20 | $12,014 | $12,257 | $178,129 |
| 25 | $7,322 | $16,949 | $103,373 |
| 30 | $833 | $23,438 | $0 |
After 10 years you have paid about $242,714, yet the balance has fallen by only $48,716. Principal does not overtake interest until payment 233, in year 20.
What the result means
The balance column is the number that matters most. Your equity is the home’s value minus that balance, so the schedule shows how slowly equity builds from payments alone in the early years. The interest column shows the cost of borrowing in each year, which is highest at the start and falls every year after.
What changes the result
- Interest rate: a higher rate raises the payment and sends more of each early payment to interest.
- Term: a shorter term pays principal much faster. The same $320,000 loan over 15 years has a $2,788 payment and about $181,758 of total interest.
- Extra payments: any extra principal lowers the balance, so every later month has less interest and the loan ends early.
Common mistakes
- Expecting the balance to fall by the same amount every year.
- Assuming half the loan is paid off halfway through the term. In the example, the balance after 15 years is still $232,189, about 73% of the original loan.
- Reading the payment as the full housing cost. Tax, insurance and any mortgage insurance come on top.
- Using a fixed-rate schedule for an adjustable-rate loan. The schedule holds only while the rate stays the same.
Related calculators
Compare a new loan against your current schedule with the refinance calculator. If you pay mortgage insurance on a conventional loan, the PMI calculator estimates when your balance reaches the point where it can come off.
Frequently asked questions
Does an amortization schedule include taxes and insurance?
No. It covers principal and interest only. For the full payment use the mortgage calculator.
What is negative amortization?
It happens when a payment is smaller than the interest due, so the balance grows instead of shrinking.
Does the schedule change if I refinance?
Yes. A refinance starts a new loan with a new schedule.
When do I start paying more principal than interest?
It depends on the rate and term. On the example $320,000 loan at 6.5% over 30 years, it happens at payment 233, in year 20. A lower rate or a shorter term brings that point forward.
How much will I owe after 10 years?
On the example loan, $271,284 of the original $320,000. Enter your own loan to see the balance for each year.
Do extra payments change the amortization schedule?
Yes. The required payment stays the same, but the balance drops faster, later payments carry less interest and the loan is paid off before the original end date.
Why is my first payment almost all interest?
Interest is charged on the balance, and the balance is at its highest in month one. On the example loan, about $1,733 of the first $2,023 payment is interest.