What an amortization schedule shows
An amortizing loan is repaid with equal monthly payments. Each payment covers the interest due on the remaining balance, and the rest pays down the principal. Early in the loan the balance is large, so most of the payment is interest; as the balance shrinks, the interest portion falls and the principal portion grows. The amortization schedule lists this split for every payment, together with the balance left afterwards.
Payment = P × r ÷ (1 − (1 + r)^−n) (r = annual rate ÷ 12, n = years × 12)
Interest this month = balance × r
Principal this month = payment − interest
New balance = balance − principal
Worked example: $300,000 at 6.5% for 30 years
- Monthly payment: $1,896.20.
- First payment: interest $300,000 × 0.065 ÷ 12 = $1,625.00, so only $271.20 goes to principal.
- In year 1 you pay $19,401.27 of interest and $3,353.18 of principal. The balance is still $296,646.82.
- After 10 years the balance is $254,328.38: only about 15% of the loan is repaid after a third of the term.
- Principal first exceeds interest in year 20, and the last year is almost all principal ($21,973.15 against $781.30).
- Over 360 payments you pay $382,633.47 in interest, more than the amount borrowed.
15-year versus 30-year schedule
The same $300,000 at 6.5% over 15 years costs $2,613.32 a month, $717 more, but the first payment already puts $988.32 toward principal and the total interest is $170,397.98, about $212,000 less than the 30-year loan. Use the extra-payment field to see a middle path: paying more each month on a 30-year loan without committing to the higher required payment.
Why the schedule matters
- Selling or refinancing early: the balance column shows what you would still owe.
- Equity: home price minus the balance shows your equity before any change in value, useful for removing PMI at 20% equity.
- Taxes: the yearly interest column is what appears on Form 1098 if you deduct mortgage interest.
- Other loans: the same schedule works for car loans, personal loans and student loans with a fixed rate.
Limits of this schedule
- It assumes a fixed rate and on-time payments. Adjustable-rate loans recalculate when the rate changes.
- Property tax, insurance and PMI collected in escrow are not part of the amortization; they are added on top of the payment.
- Lenders round each payment to the cent, so the last payment can differ by a few cents.
How to read the yearly summary
The yearly table adds up twelve payments at a time. The principal column is how much your debt actually fell that year; the interest column is the cost of borrowing for that year; the balance column is what you would owe if you sold the home or refinanced at the end of that year. Comparing the first and last rows shows the shape of every fixed-rate loan: interest falls steadily while principal rises, even though the payment never changes. If you add an extra monthly payment, the schedule ends early and the last row shows the year the loan is paid off.
Using the start date
Enter the month of your first payment to label the schedule with real dates instead of payment numbers. That makes it easy to find the balance on a specific date, such as when you plan to sell, when an adjustable rate resets or when you expect to reach 20% equity and can ask the lender to cancel PMI.
Common mistakes
- Expecting equity to build evenly. Most equity in the early years comes from price changes and the down payment, not from payments.
- Using the APR as the rate. The APR includes fees; enter the note rate to match your lender's schedule.
Estimates only. Your lender's amortization schedule is the official record.
Frequently asked questions
How much of my first mortgage payment goes to interest?
On $300,000 at 6.5% for 30 years, $1,625.00 of the first $1,896.20 payment is interest and $271.20 is principal.
How much do I still owe after 10 years on a 30-year mortgage?
For $300,000 at 6.5%, about $254,328, because early payments are mostly interest.
How is an amortization schedule calculated?
Each month interest = balance × annual rate ÷ 12; the rest of the fixed payment reduces the balance.
Can I use this for a car or personal loan?
Yes. Any fixed-rate loan with equal monthly payments amortizes the same way.
Why is so much of my mortgage payment interest?
Interest is charged on the remaining balance. At the start the balance is at its highest, so interest takes most of the payment; the share falls every month as the balance shrinks.
When does principal exceed interest on a 30-year mortgage?
On $300,000 at 6.5%, in year 20. At lower rates it happens earlier, at higher rates later.
Sources
- Consumer Financial Protection Bureau (consumerfinance.gov). What is amortization and how could it affect my auto loan or mortgage?
- IRS Publication 936: Home Mortgage Interest Deduction (Form 1098).
- Consumer Financial Protection Bureau. When can I remove private mortgage insurance (PMI)?
Last reviewed 27 October 2026. Results are estimates; see our disclaimer.