Amortization Schedule Explained – How Loan Payments Break Down
An amortization schedule is a table that shows every payment over the life of a loan, broken into principal and interest. Early payments are mostly interest; as the balance shrinks, more of each payment goes toward principal. Understanding your amortization schedule helps you see how much interest you will pay over the loan term, how extra payments can save money, and when you will reach key equity milestones. This article explains how amortization works, walks through an example with a 30-year mortgage, and links to our free Amortization Schedule Calculator so you can generate your own month-by-month breakdown.
Quick Answer
| Label | Value |
|---|---|
| Loan amount | $300,000 |
| Rate / Term | 6.5% / 30 years |
| Monthly payment | $1896.20 |
| First month interest | $1625.00 |
How It Works
Each month: interest = remaining balance x monthly rate; principal = payment minus interest. The monthly payment stays fixed (calculated with the standard amortization formula), but the split shifts over time. On a $300,000 loan at 6.5% for 30 years, the first payment allocates most to interest. By mid-term, the split is roughly even. In the final years, nearly the entire payment is principal. Use our Amortization Schedule Calculator to generate your full table and see the impact of extra payments.
Use Our Calculator
Try our Amortization Schedule Calculator for your own numbers: /calculators/amortization-schedule
Related Calculators
Interest is calculated on the remaining balance, which is highest at the start. As the balance decreases, less goes to interest and more to principal.
Extra payments reduce the principal faster, which lowers interest charged in future months and can shorten the loan term significantly.
The math is the same for any fixed-rate loan (mortgage, auto, personal). Adjustable-rate loans recalculate when the rate changes.