Mortgage Amortization Schedule Explained: Step-by-Step Guide for 2026

A mortgage amortization schedule is your roadmap to homeownership—showing exactly how each payment builds equity and reduces debt. Understanding your amortization schedule empowers you to make smarter financial decisions and potentially save tens of thousands in interest.

What Is Mortgage Amortization?

Mortgage amortization is the process of paying off your home loan through regular, scheduled payments over a set period. Each payment includes both principal (loan balance) and interest, with the proportion shifting over time.

The Key Principle

Early payments: Mostly interest Later payments: Mostly principal

This happens because interest is calculated on the remaining balance, which decreases with each payment.

Anatomy of an Amortization Schedule

Standard Columns

Month	Payment	Principal	Interest	Balance
1	$1,500	$250	$1,250	$299,750
2	$1,500	$251	$1,249	$299,499
...	...	...	...	...
360	$1,500	$1,494	$6	$0

What Each Column Means

Payment: Total monthly amount (principal + interest)

Principal: Amount reducing your loan balance

Interest: Cost of borrowing (paid to lender)

Balance: Remaining loan amount after payment

Real Amortization Example

Loan Details

• Loan amount: $300,000
• Interest rate: 7%
• Term: 30 years (360 months)
• Monthly payment: $1,996

First 12 Months Breakdown

Month	Payment	Principal	Interest	Balance
1	$1,996	$246	$1,750	$299,754
2	$1,996	$247	$1,749	$299,507
3	$1,996	$249	$1,747	$299,258
4	$1,996	$250	$1,746	$299,008
5	$1,996	$252	$1,744	$298,756
6	$1,996	$253	$1,743	$298,503
7	$1,996	$255	$1,741	$298,248
8	$1,996	$256	$1,740	$297,992
9	$1,996	$258	$1,738	$297,734
10	$1,996	$260	$1,736	$297,474
11	$1,996	$261	$1,735	$297,213
12	$1,996	$263	$1,733	$296,950

Year 1 totals:

• Total payments: $23,952
• Principal paid: $3,050
• Interest paid: $20,902
• 87% went to interest!

Year 15 (Midpoint)

Month	Payment	Principal	Interest	Balance
181	$1,996	$738	$1,258	$215,446
182	$1,996	$742	$1,254	$214,704
183	$1,996	$747	$1,249	$213,957

At midpoint:

• Balance: ~$215,000 (28% paid off)
• Principal portion: 37%
• Interest portion: 63%

Year 30 (Final Months)

Month	Payment	Principal	Interest	Balance
358	$1,996	$1,973	$23	$3,989
359	$1,996	$1,985	$11	$2,004
360	$1,996	$1,996	$0	$0

Final year:

• Almost entirely principal
• Minimal interest paid
• Equity building rapidly

The Math Behind Amortization

Monthly Interest Calculation

Monthly Interest = (Loan Balance × Annual Rate) / 12

Example (Month 1):

• Balance: $300,000
• Annual rate: 7%
• Monthly interest: ($300,000 × 0.07) / 12 = $1,750

Monthly Principal Calculation

Monthly Principal = Payment - Monthly Interest

Example (Month 1):

• Payment: $1,996
• Interest: $1,750
• Principal: $1,996 - $1,750 = $246

New Balance

New Balance = Old Balance - Principal Paid

Example (Month 1):

• Old balance: $300,000
• Principal: $246
• New balance: $300,000 - $246 = $299,754

Amortization by Loan Term

15-Year vs 30-Year Comparison

$300,000 loan at 7%:

Term	Monthly Payment	Total Interest	Total Paid
15 years	$2,696	$185,258	$485,258
30 years	$1,996	$418,527	$718,527

Difference:

• Monthly: $700 more for 15-year
• Total interest saved: $233,269
• Years of payments saved: 15

How Term Affects Amortization

15-Year Loan:

• Higher monthly payments
• Less total interest
• Faster equity building
• Greater wealth accumulation

30-Year Loan:

• Lower monthly payments
• More total interest
• Slower equity building
• Greater cash flow flexibility

Interest Rate Impact on Amortization

$300,000 Loan, 30-Year Term

Rate	Monthly Payment	Total Interest	Total Paid
5%	$1,610	$279,767	$579,767
6%	$1,799	$347,515	$647,515
7%	$1,996	$418,527	$718,527
8%	$2,201	$492,453	$792,453

Impact of 1% rate increase:

• $205 higher monthly payment
• $73,926 more in total interest

Reading Your Amortization Schedule

Key Milestones to Track

Year 1:

• Check: 85-90% goes to interest
• Normal: Very slow principal paydown
• Action: Consider extra payments

Year 5:

• Typical balance: ~85-90% remaining
• Opportunity: Refinancing window
• Consideration: PMI removal at 80%

Year 10:

• Typical balance: ~70-75% remaining
• Milestone: Principal payments accelerating
• Strategy: Evaluate prepayment options

Year 15 (Midpoint):

• Expected balance: ~65-70% remaining
• Shift: Principal equals or exceeds interest
• Decision: Continue or accelerate payoff

Year 20:

• Typical balance: ~40-45% remaining
• Advantage: Equity built significantly
• Option: Home equity borrowing available

Year 25:

• Remaining balance: ~20% of original
• Status: Most payments now principal
• Choice: Coast to payoff or refinance

Warning Signs in Your Schedule

🚩 Balance not decreasing as expected:

• Possible cause: Interest-only period
• Check: Loan terms and payment structure
• Action: Contact lender for clarification

🚩 Payment amounts changing:

• Possible cause: ARM adjusting
• Check: Rate adjustment schedule
• Action: Review loan documents, consider refinancing

🚩 Extra charges appearing:

• Possible cause: Escrow shortages, fees
• Check: Monthly statement details
• Action: Verify charges are legitimate

Extra Payments and Amortization

Impact of One Extra Payment Per Year

$300,000 loan, 7%, 30-year:

Standard payment:

• Monthly: $1,996
• Total interest: $418,527
• Payoff: 30 years

With one extra annual payment:

• Monthly: $1,996
• Annual extra: $1,996
• Total interest: $354,197
• Payoff: 25.5 years
• Savings: $64,330 and 4.5 years

Extra Payment Strategies

Strategy 1: Bi-Weekly Payments

Instead of 12 monthly payments, make 26 bi-weekly payments:

• Monthly payment: $1,996
• Bi-weekly payment: $998
• Annual total: $998 × 26 = $25,948
• Extra annually: $1,000 (one extra payment)

Impact:

• Payoff: ~25 years (5 years early)
• Interest saved: ~$70,000

Strategy 2: Round Up Payments

• Standard payment: $1,996
• Round to: $2,100
• Extra per month: $104
• Extra per year: $1,248

Impact:

• Payoff: ~24 years (6 years early)
• Interest saved: ~$88,000

Strategy 3: Annual Bonus Payment

Apply tax refund or work bonus:

• Regular payment: $1,996/month
• Annual bonus: $5,000
• Extra: $5,000 once per year

Impact:

• Payoff: ~19 years (11 years early)
• Interest saved: ~$150,000

Where Extra Payments Go

Important: Extra payments go directly to principal, not future payments.

Correct application:

• Current balance: $280,000
• Extra payment: $10,000
• New balance: $270,000
• Future interest calculated on $270,000

Wrong application:

• Extra payment held for future months
• No immediate principal reduction
• No interest savings

Always specify: "Apply to principal" when making extra payments.

Amortization Types

1. Fully Amortizing Loans

Characteristics:

• Fixed payment amount
• Gradual principal reduction
• Loan paid off at end of term
• Most common for mortgages

Example: 30-year fixed mortgage

2. Partially Amortizing Loans

Characteristics:

• Regular payments don't fully pay off loan
• Balloon payment required at end
• Lower monthly payments
• Higher risk at maturity

Example:

• $300,000 loan
• 30-year amortization
• 7-year balloon
• After 7 years: $262,000 balloon due

3. Interest-Only Loans

Characteristics:

• Pay only interest for initial period
• Principal unchanged during interest-only period
• Payments jump when amortization begins
• Higher total interest paid

Example:

• First 10 years: $1,750/month (interest only)
• Years 11-30: $2,381/month (principal + interest)
• Balance at year 10: Still $300,000

4. Negative Amortization

Characteristics:

• Payment less than interest due
• Unpaid interest added to principal
• Balance grows over time
• Payment shock when recast occurs

Danger: Can owe more than original loan amount.

Example:

• Monthly interest due: $1,750
• Monthly payment: $1,500
• Unpaid interest: $250 (added to principal)
• New balance: $300,250 (higher than before)

Amortization Schedule Tools

What to Look For

Essential features:

• Month-by-month breakdown
• Principal/interest split
• Running balance
• Cumulative totals
• Extra payment modeling

Advanced features:

• Multiple extra payment scenarios
• Early payoff date calculation
• Interest savings comparison
• Biweekly payment option
• Rate change modeling (ARMs)

Using Our Mortgage Calculator

Calculate your amortization:

1. Enter loan amount
2. Input interest rate
3. Select loan term
4. View complete schedule
5. Model extra payments

Try Mortgage Calculator →

Refinancing and Amortization

Impact of Refinancing

Scenario:

• Original loan: $300,000, 7%, 30 years
• After 5 years: $279,383 remaining
• Refinance to: 6%, 15 years

Old schedule:

• Remaining term: 25 years
• Monthly payment: $1,996
• Total interest remaining: $319,000

New schedule:

• New term: 15 years
• Monthly payment: $2,357
• Total interest: $145,000
• Savings: $174,000

Trade-off:

• $361 higher monthly payment
• 10 fewer years of payments
• Massive interest savings

When Refinancing Makes Sense

Good scenarios:

• Rate drops 0.75%+ from current
• Want to shorten term significantly
• Cash flow supports higher payment
• Plan to stay in home 3+ years

Bad scenarios:

• Near end of current loan term
• Closing costs exceed 2 years of savings
• Planning to move within 2-3 years
• Already low rate (sub-5%)

Amortization FAQs

Why does so much go to interest early on?

Interest is calculated on the remaining balance. Early in the loan, your balance is highest, so interest charges are highest. As you pay down principal, interest decreases and more of each payment goes to principal.

Can I change my amortization schedule?

Yes, through refinancing to a different term or rate. You can also effectively change it by making extra principal payments, which speeds up amortization without officially refinancing.

Do all mortgages amortize the same way?

No. Fixed-rate mortgages use standard amortization. ARMs recalculate when rates adjust. Interest-only and balloon loans have different structures. Always check your specific loan terms.

How do extra payments affect my schedule?

Extra payments reduce principal faster, which decreases future interest charges. Each extra payment effectively moves you forward multiple months in your amortization schedule.

What's better: extra payments or investing?

If your mortgage rate exceeds expected investment returns, extra payments may be better. For rates below 5%, investing often yields higher returns. Consider your risk tolerance and financial goals.

Can I get a new amortization schedule from my lender?

Yes, most lenders provide updated amortization schedules upon request, especially after refinancing or when making large principal payments. Some provide them automatically with monthly statements.

Does PMI affect amortization?

No. PMI is an additional charge but doesn't change how your loan amortizes. Once you reach 20% equity (80% LTV), PMI can be removed, lowering your total payment but not changing principal/interest allocation.

What happens if I skip a payment?

Skipping a payment doesn't advance your amortization schedule—you're still responsible for that payment plus late fees. The loan doesn't automatically extend; you must work with your lender for forbearance or modification.

Strategies to Optimize Your Amortization

1. Front-Load Principal Payments

Best time: First 10 years of loan

Why: Maximum interest savings when balance is highest

How:

• Make extra payments early
• Apply windfalls to principal
• Set up automatic extra payments

Impact:

• $1,000 extra in year 1 saves ~$2,000 in interest
• Same $1,000 in year 25 saves ~$100 in interest

2. Recast Your Loan

What it is: Make large principal payment, lender recalculates monthly payment

Benefits:

• Lower monthly payment
• Keep same interest rate
• Keep same loan term
• Lower cost than refinancing

Requirements:

• Minimum payment: Usually $5,000-$10,000
• Fee: $150-$500
• Not available with all lenders

Example:

• Original: $300,000, $1,996/month
• Pay $50,000 extra → recast
• New: $250,000, $1,663/month
• Savings: $333/month

3. Switch to Biweekly Payments

How it works:

• Pay half your monthly payment every 2 weeks
• Makes 26 half-payments = 13 full payments annually
• One extra payment per year

Setup:

• Contact lender about biweekly program
• Or manually make 13 payments per year
• Ensure extra payment applies to principal

4. Increase Payment Annually

Strategy:

• Start with normal payment
• Increase by 1-2% each year
• Matches typical salary increases

Example:

• Year 1: $2,000/month
• Year 2: $2,020/month (+1%)
• Year 3: $2,040/month (+1%)

Impact:

• Barely noticeable increase
• Significant long-term savings
• Pays off years early

Conclusion

Understanding your mortgage amortization schedule empowers you to make informed decisions about your home loan. Whether you choose to make extra payments, refinance to a shorter term, or simply follow the standard schedule, knowing how each payment builds equity helps you optimize your path to homeownership.

Key takeaways:

• Early payments mostly cover interest
• Extra payments directly reduce principal
• Shorter terms save substantial interest
• Small additional payments create big savings
• Review your schedule annually

Use our mortgage calculator to generate your complete amortization schedule and explore different payment strategies to find the best approach for your financial situation.

Calculate Your Amortization Schedule →