Mortgage Amortization Schedule: Understanding Your Loan Repayment Breakdown

Mortgages can be expensive, so it's important to understand just what you're getting into before taking one out.

An amortization schedule can help you do this. These financial breakdowns detail how much you'll pay for your mortgage each month, as well as what portion of it goes toward interest and your principal balance.

Are you preparing to take out a mortgage? Here's what to know about amortization before you do.

What is a mortgage amortization schedule?

Amortization is when you spread the cost of something out over even payments across a set period of time. A schedule helps you understand those costs in more detail.

Definition

A mortgage amortization schedule shows how much you'll pay each month toward your mortgage. The schedule breaks down each payment by showing how much of the payment goes toward your mortgage principal (the amount you borrow) and toward interest (the fee a lender charges for loaning you money). 

The amortization schedule also tracks how much you have left to pay on your principal after each monthly payment is complete.

Purpose

An amortization schedule will show that you pay the same amount each month, but the amount you'll pay toward the principal and interest changes monthly. More of your payment goes toward interest at the beginning, and by the end, most of your payment covers the principal. 

This logic may seem weird, but think of it like this, assuming a hypothetical interest rate of 3.5%: 3.5% of $200,000 is less than 3.5% of $150,000, so it makes sense that you're paying less in interest once you've paid down more of your principal.

A mortgage amortization schedule can help you keep track of how much you have left to pay on your mortgage and understand how much you're paying toward interest. Tracking these numbers can help you make decisions, such as whether you want to refinance your mortgage for a lower rate or make extra mortgage payments toward your principal. Or you just may want to stay informed about what you're paying.

If you haven't gotten a mortgage yet, sample mortgage amortization schedules can help you decide which term length you want to get. For instance, a schedule will reveal that a 30-year mortgage results in lower monthly payments than a 15-year mortgage, but also that you'll pay a lot more in interest over the years.

You'll have other monthly house-related expenses, like property taxes and insurance, but these aren't factored into your amortization schedule, because they aren't debt-related — you aren't trying to pay off mortgage insurance the same way you're trying to pay off a mortgage.

How does a mortgage amortization schedule work?

Here's how a mortgage amortization schedule works and how to calculate yours.

Amortization calculation

Calculating an amortization schedule is a little complicated. You'll need to know the initial loan amount, the interest rate, and the length of the loan.

The exact formula for calculating the monthly payment is:

Loan amount x [monthly interest x (1 + monthly interest)number of payments / (1 + monthly interest)number of payments -1]

If you don't want to calculate amortization yourself, there are plenty of online tools that can do it for you. We'll go more into this later on.

Early payments are mostly interest, with a gradual shift toward principal

Due to the nature of amortization, your early payments are largely interest. By the time you get to the end of your loan, you're paying much more toward the principal balance instead.

To see how this works in action, let's look at an amortization schedule example for a 30-year mortgage. A 30-year fixed-rate mortgage requires you to pay off your loan for 30 years, or 360 months, and you'll pay the same rate the entire time.

In this example, you have a $200,000 mortgage at a 3.5% interest rate. We've rounded each number to the nearest dollar. Here is your mortgage amortization schedule for the first year:

As you can see, you'll pay $898 each month, with most of that money going toward interest at first. You'll gradually start putting more toward the principal and less toward interest each month.

Now let's look at your payment schedule for the last year of your 30-year mortgage:

Almost 30 years later, you're still paying $898 per month, but most of your payment is going toward your principal.

Final payment

As you can see in the above example, you're making the same payment for every month no matter what year of the loan you're in. The difference is how much goes toward principal and how much goes toward interest.

When you make your final monthly payment (in December 2054, in the above example), you will have fully paid off the loan.

How to read a mortgage amortization schedule

An amortization schedule comes with a bunch of numbers. Here's how you can read yours.

Column breakdown

These are the columns you'll typically see in an amortization schedule and what they each mean:

• Payment number: This is the number of payments you've made so far on the loan.
• Payment date: This is the month the payment is due.
• Beginning balance: This one notes what the total loan balance is prior to the current payment.
• Payment amount: This is your monthly payment.
• Principal paid: This one is how much of your payment is going toward the principal balance for the month.
• Interest paid: This is how much of your payment is going toward interest.
• Ending balance: This is your new loan balance once the payment has been applied.

Interpreting the data

Amortization schedules make it easy to spot trends in your payments and track your loan balance as you move further into your loan term. They can also help you understand how much you're currently paying toward principal and interest.

Why is an amortization schedule important?

An amortization schedule can be a valuable tool when weighing your mortgage options, as well as once you're already in a home. You can use one for:

Financial planning

You can use amortization schedules to compare different mortgage options and to ensure a mortgage loan meets your financial needs and budget. It can also help you understand your long-term financial commitment when taking out a loan.

Tracking progress

Once you have a mortgage, you can also use amortization schedules to track your payoff progress. It clearly breaks down what you've paid down, what you have left, and how quickly you're progressing in your payoff timeline.

Evaluating refinancing or early payoff

You can also use amortization schedules to evaluate how extra payments or paying off your loan early could benefit you financially. If you're considering a refinance, an amortization schedule can also clue you into the financial savings your new loan might net you.

How to create a mortgage amortization schedule

You can ask your lender for an amortization schedule, but this might not be as helpful if you're looking to see how extra payments could impact that schedule. Fortunately, there are other options, too.

Online calculators

The simplest way to see a personalized mortgage amortization schedule is to use an online calculator on websites like HSH. Online calculators let you play around with how your schedule would change if you were to, say, get a 20-year term instead of a 30-year term, or pay a little extra every month.

Spreadsheets

You can also make your own amortization schedule on Microsoft Excel or Google Sheets. You don't have to do all the math yourself — there are plenty of explainers online about what formulas to use to create an amortization table relatively quickly.

Either way, be prepared to enter the amount you borrow for your mortgage, the interest rate, and the term length to get accurate numbers. Hopefully, seeing the details of your payments will help you have a better handle on your money and make any big decisions about your mortgage.

Mortgage amortization schedule FAQs

Laura Grace Tarpley, CEPF

Personal Finance Reviews Editor

Laura Grace Tarpley (she/her) was a former expert in mortgage rates, refinance rates, lenders, bank accounts, and borrowing and savings tips for Personal Finance Insider. She worked on Business Insider's "The Road to Home" series, which won a Silver award from the National Associate of Real Estate Editors.She has written about personal finance for over seven years. Before joining the Business Insider team, she was a freelance finance writer for companies like SoFi and The Penny Hoarder, as well as an editor at FluentU.

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Aly J. Yale

Aly J. Yale is a writer specializing in real estate, mortgage, and the housing market. Her work has been published in Forbes, Money Magazine, Bankrate, The Motley Fool, The Balance, Money Under 30, and more.She served as an editor and reporter for The Dallas Morning News. She graduated from TCU's Bob Schieffer College of Communication with a focus on radio-TV-film and news-editorial journalism. Connect with her on Twitter or LinkedIn.

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