Amortization Schedule Explained: How Loan Payments Work
Understand how amortization splits each payment into principal vs interest, and why early payments are mostly interest.
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Key Takeaways
- 1Amortization = paying off debt in equal installments over time.
- 2Early payments are mostly interest; later payments are mostly principal.
- 3A 30-year mortgage is ~50% interest by dollar — not just the rate.
- 4Extra principal payments early save the most total interest.
An amortization schedule shows exactly where every loan payment goes. Understanding it helps you decide whether to pay extra principal, refinance, or choose a shorter term.
View your full schedule in our mortgage calculator.
Principal vs Interest Each Month
Month 1 on a $350,000 loan at 7%: payment is $2,329, but only $287 goes to principal and $2,042 to interest. By year 20, the split reverses.
This is why refinancing early in the loan resets the interest-heavy period.
Total Interest Cost
That same $350,000 loan costs $488,000 in total payments — $138,000 in interest alone. A 15-year term cuts interest by more than half but raises monthly payments.
Learn the payment formula in our mortgage payment guide.
How to Pay Off Faster
One extra payment per year on a 30-year mortgage can cut 4–5 years off the term. Round up monthly payments or apply windfalls to principal.
Compare biweekly vs monthly payment strategies.
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