A $360,000 mortgage at 6.50% has $27,305 in scheduled principal and interest during its first 12 payments. About $4,024 reduces principal; about $23,282 is interest. The balance after payment 12 is about $355,976.
How mortgage amortization works
Each scheduled principal-and-interest payment covers the interest accrued for that period and applies the rest to principal. Interest is calculated from the outstanding balance, so reducing the balance leaves less principal on which future interest can accrue.
For a standard fixed-rate loan, the payment formula is:
- M is monthly principal and interest.
- P is the starting principal.
- r is the monthly interest rate.
- n is the total number of monthly payments.
For payment number k, the remaining scheduled balance can be estimated as:
These formulas assume a level rate, payments made on schedule and no extra principal. Taxes, insurance, PMI and HOA dues are separate from loan amortization; see our complete mortgage payment breakdown for those costs.
How to read an amortization schedule
| Column | What it tells you |
|---|---|
| Payment number/date | Where the row falls in the contractual payment timeline. |
| Beginning balance | Principal owed before that month’s scheduled payment is applied. |
| Payment | Scheduled principal and interest. Your total bill may be higher because of escrow or mortgage insurance. |
| Interest | The period’s interest calculated from the outstanding principal under the note terms. |
| Principal | The portion that reduces the loan balance. |
| Ending balance | Principal remaining after the scheduled payment. |
Rounding can make a lender’s final line differ slightly from a hand calculation. Payment timing, per-diem interest, servicing conventions and adjustments can also create differences. Treat an online schedule as a planning model and use the lender or servicer schedule for account-specific figures.
Worked example: a $360,000 fixed-rate mortgage
After roughly one year, the scheduled balance is about $355,976. Only about $4,024 of principal has been repaid, while approximately $23,282 of scheduled interest has accrued through the first 12 payments. After roughly 15 years, the balance is still about $261,000. The curve becomes steeper later because more of each level payment reaches principal.
These rounded figures explain a key point: paying for 15 years does not necessarily mean half the original balance is gone. Explore the exact year-by-year curve with the interactive graph in our mortgage calculator.
Amortization is not the same as equity
Scheduled principal repayment increases your ownership stake, but home equity is broader:
Market value can rise or fall. A home-equity loan, HELOC, unpaid liens, selling costs and market conditions can affect the amount an owner actually realizes. Do not equate the “principal paid” column with guaranteed spendable equity.
What extra principal payments can change
An additional principal payment reduces the balance ahead of schedule. If the servicer applies it correctly and the loan is not recast, the required principal-and-interest payment usually stays the same while the payoff date can move earlier and future interest can decline.
Before sending extra money
- Confirm there is no relevant prepayment penalty and review the note.
- Tell the servicer to apply the amount to principal, not merely to the next payment due.
- Keep the regular payment current.
- Check the following statement to verify the principal balance fell as expected.
- Compare the guaranteed return from debt reduction with liquidity, emergency reserves and other priorities.
15-year versus 30-year amortization
| Feature | 15-year term | 30-year term |
|---|---|---|
| Required payment | Usually higher for the same principal and rate. | Usually lower, leaving more monthly flexibility. |
| Principal pace | Faster scheduled balance reduction. | Slower scheduled balance reduction. |
| Lifetime interest | Usually lower because the balance exists for fewer years. | Usually higher if held for the full term. |
| Risk to budget | Higher mandatory payment can reduce flexibility. | Lower mandatory payment may be easier to absorb, though total cost can be higher. |
The “best” term depends on the actual rate quotes, cash flow, savings, retirement goals, job stability and how long you expect to keep the loan. Compare complete Loan Estimates before deciding which term costs less for your case.
Common amortization mistakes
- Looking only at the payment: two loans can share a payment but have different balances, rates, terms or fees.
- Including escrow in principal: tax and insurance deposits do not reduce the mortgage balance.
- Assuming appreciation: an amortization table models debt, not future property value.
- Ignoring sale or refinance timing: lifetime interest is less relevant if the loan will end early, but transaction costs and the balance at exit matter.
- Sending “extra” without instructions: verify that the servicer applied it as intended.
Frequently asked questions
Why is so little principal paid at the beginning?
The balance is largest at the beginning, so that period’s interest is also larger. As scheduled principal lowers the balance, less interest accrues and more of the level payment becomes principal.
Does amortization include taxes and insurance?
No. Amortization describes repayment of loan principal and interest. Escrow deposits, mortgage insurance and association dues affect the total housing payment but do not amortize the loan.
Can an adjustable-rate mortgage have an amortization schedule?
Yes, but future rows depend on rate changes and the loan’s adjustment rules. A single fixed schedule cannot predict unknown future index values.
What is negative amortization?
Negative amortization occurs when a payment is insufficient to cover the interest due and unpaid interest is added to the balance under the loan terms. It is different from the standard fully amortizing example used here.
Does refinancing reset amortization?
A refinance replaces the old debt with a new loan and a new schedule. Extending the payoff horizon can reduce the payment but may increase total interest and costs, so compare the remaining cost with the new monthly amount.
How do you calculate a mortgage amortization schedule?
First calculate the scheduled monthly principal-and-interest payment with the fixed-payment formula. For each month, multiply the beginning balance by the monthly rate to find interest; subtract that interest from the scheduled payment to find principal; subtract the principal from the balance; then repeat. Keep full precision until display because rounding every monthly step can shift the final row.
Put the amortization schedule to work
The payment and balance examples were recalculated on September 9, 2026. The two CFPB links below were checked the same day.
Examples use the fixed-rate amortization formula shown above, retain unrounded figures during calculation and round dollars for display. The CFPB explains how lenders calculate monthly principal-and-interest payments and why the total bill may include additional costs.
Financial disclaimer: Educational information only, not financial, legal, tax or lending advice. Loan documents and servicer records control your actual payment application, balance and payoff requirements.