📋 Amortization Schedule
What is Amortization?
Amortization is the process of paying off a loan in equal installments over time. Early payments go mostly toward interest; later payments shift toward principal as the balance decreases.
Extra Payments Save Big
Even small extra monthly payments dramatically reduce total interest paid. On a $250,000, 30-year loan at 6.5%, an extra $200/month saves over $60,000 in interest and cuts 5+ years off the loan.
Frequently Asked Questions
An amortization schedule is a complete table of all loan payments showing how each payment is divided between principal and interest, and the remaining balance after each payment. Early payments are mostly interest; later payments are mostly principal.
Interest is calculated on the outstanding balance. At the start, your balance is highest, so interest charges are highest. As you pay down principal, the balance shrinks, and each subsequent payment has a smaller interest portion and larger principal portion.
Total interest = (Monthly payment × number of payments) − loan amount. For a $300,000 mortgage at 7% for 30 years: monthly payment ≈ $1,996, total payments ≈ $718,560, total interest ≈ $418,560. This is why refinancing at a lower rate can save so much.
Negative amortization occurs when your monthly payment is less than the interest due, causing your balance to actually increase over time. This can happen with some adjustable-rate mortgages or income-based loan repayment plans. It's generally something to avoid.