What is an amortization schedule?

An amortization schedule is a table showing each mortgage payment broken down into principal and interest portions, along with your remaining loan balance after each payment. It illustrates how your loan balance decreases over time and how the proportion of principal vs. interest changes throughout the life of the loan.

Why are my early mortgage payments mostly interest?

Mortgages are structured so you pay the bulk of interest in the first few years. In Year 1, roughly 80% of your payment goes to interest and only 20% to principal. This happens because interest is calculated on your outstanding balance—when your balance is highest (at the start), interest charges are highest. As you pay down the balance, interest decreases and more of your payment goes toward principal.

How can I pay off my mortgage faster?

Making extra payments toward principal can significantly accelerate your payoff. Strategies include: making one extra payment per year (saves 4-5 years), bi-weekly payments, rounding up your monthly payment, or applying lump sums (bonuses, tax refunds) directly to principal. Use our mortgage calculator to see how extra payments affect your payoff timeline.

How much interest will I save by making extra payments?

The savings depend on your loan amount, interest rate, and payment strategy. Making just one extra payment per year on a $400,000 loan at 6.5% can save approximately $45,000 in interest and pay off the loan 4.5 years early. The earlier you start making extra payments, the more interest you'll save because interest is calculated on the remaining balance.

What's the difference between principal and interest?

Principal is the actual loan amount you borrowed. Interest is the cost of borrowing money, calculated as a percentage of your outstanding balance. In your monthly payment, part goes to principal (reduces your debt) and part goes to interest (cost of the loan). Early in the loan, most goes to interest; later, most goes to principal.

Should I pay extra on my mortgage or invest the money?

This depends on your interest rate, investment returns, and financial goals. If your mortgage rate is high (above 6%), paying it down can provide a guaranteed return. If rates are low and you can earn more investing, investing may be better. Consider factors like tax deductions, emergency fund needs, and retirement savings goals. Use our mortgage calculator to compare scenarios.

Understanding Amortization: How Your Mortgage is Paid Off

Have you ever looked at your first mortgage statement and noticed that out of a $2,000 payment, only $300 went toward your actual loan balance? This is due to amortization, the process of spreading a loan into a series of fixed payments over time.

The "Front-Loaded" Interest Trap

Mortgages are structured so that you pay the bulk of the interest in the first few years.

Year 1

Roughly 80% of your payment goes to the bank as interest; only 20% pays off your debt.

Example: $2,000 payment = $1,600 interest + $400 principal

Year 15

The split is closer to 50/50—half interest, half principal.

Example: $2,000 payment = $1,000 interest + $1,000 principal

Year 29

Almost 95% of your payment goes toward the principal.

Example: $2,000 payment = $100 interest + $1,900 principal

The Amortization Curve

The proportion of your payment going toward principal increases over time, creating an upward-sloping curve. In the early years, you're primarily paying interest on the large loan balance. As the balance decreases, interest charges shrink, allowing more of your fixed payment to reduce the principal.

Why Does This Happen?

Interest is calculated on your current outstanding balance. In the beginning, your balance is huge (e.g., $400,000), so the interest charge is huge. As you slowly chip away at the balance, the interest charge drops, allowing more of your fixed payment to attack the principal.

The Math Behind It

Monthly Interest Calculation:

Monthly Interest = (Annual Rate ÷ 12) × Outstanding Balance

Example on a $400,000 loan at 6.5%:

Month 1: Balance = $400,000 → Interest = $2,167, Principal = $833 (from $3,000 payment)
Month 120: Balance = $308,000 → Interest = $1,668, Principal = $1,332
Month 360: Balance = $11,000 → Interest = $60, Principal = $2,940

The Power of Extra Payments

Because interest is calculated on the balance, every extra dollar you pay toward principal reduces your future interest bill.

Strategy: One Extra Payment Per Year

Making just one extra payment per year can:

Shave 4 to 5 years off a 30-year mortgage
Save tens of thousands in interest
Build equity faster and reduce total loan cost significantly

Example: On a $400,000 loan at 6.5% for 30 years, one extra $2,212 payment per year saves approximately $45,000 in interest and pays off the loan 4.5 years early.

Other Extra Payment Strategies

Bi-weekly Payments: Make half-payments every two weeks (26 half-payments = 13 full payments per year)
Round Up: Round your payment up to the nearest $100 or $500
Lump Sum: Apply tax refunds, bonuses, or windfalls directly to principal
Increase Monthly Payment: Add $50-$200 per month to your regular payment

Important: Designate Extra Payments as Principal-Only

When making extra payments, always specify that the payment should go toward principal only. Some lenders may apply extra payments to future payments (including interest) unless you explicitly direct them to reduce the principal balance.

Visualize Your Payoff

You don't have to guess how much you will save. You can view your full amortization schedule on our calculator to see exactly how extra payments shift the curve and help you become debt-free sooner.

Our mortgage calculator shows you:

Complete amortization schedule month-by-month
How much interest vs. principal you pay each year
Impact of extra payments on total interest and payoff time
Different payment strategies and their savings
Visual breakdown of your payment allocation over time

View Amortization Schedule →

Understanding Your Amortization Schedule

An amortization schedule is a table that shows each monthly payment broken down into principal and interest, along with your remaining balance after each payment.

Key Components of an Amortization Schedule

Payment Number: The month or payment period (1-360 for a 30-year loan)
Principal Payment: The portion of your payment that reduces the loan balance
Interest Payment: The cost of borrowing, calculated on the remaining balance
Total Payment: Principal + Interest (plus escrow for taxes/insurance if applicable)
Remaining Balance: Your outstanding loan amount after each payment