Understanding Your Mortgage Amortization Schedule
When you take out a mortgage, you agree to pay it back over a set period, typically 15 or 30 years. While your monthly payment usually stays the same (for fixed-rate loans), the internal makeup of that payment changes drastically over time. This process is called amortization.
An amortization schedule is the roadmap of your loan. It shows you exactly where every dollar goes from your first payment to your last. Understanding this schedule is the secret to paying off your home faster and saving tens of thousands of dollars in interest.
How Amortization Works: The Principal vs. Interest Shift
The most confusing part of a mortgage for new homeowners is why their loan balance goes down so slowly in the beginning. This is due to how interest is calculated.
The Golden Rule of Amortization
Interest is always calculated based on your current remaining balance.
At the start of your loan, your balance is huge (e.g., $400,000). Therefore, the monthly interest charge is also huge. Since your total monthly payment is fixed, most of that money must go to cover the interest, leaving very little leftover to pay down the principal.
Example: On a $400,000 loan at 6% interest:
- Month 1: You pay ~$2,000 in interest and only ~$400 in principal.
- Year 15: You pay ~$1,200 in interest and ~$1,200 in principal.
- Year 29: You pay ~$50 in interest and ~$2,350 in principal.
As you slowly chip away at the principal, the interest charge drops, and the "snowball" effect begins.
Key Columns in Your Schedule
When you look at the table generated by our mortgage amortization calculator, here is what each column tells you:
Payment
Your total monthly principal and interest payment. This number stays constant for fixed-rate loans.
Principal
The amount reducing your debt. You want this number to be as high as possible.
Interest
The profit the bank makes. This is money you never get back. You want this number to be low.
Balance
What you still owe on the house. When this hits $0, the house is 100% yours.
How to Pay Off Your Mortgage Faster
Now that you understand the schedule, you can hack it. Since interest is based on the balance, anything you do to lower the balance early on has a massive impact.
1. Make Bi-Weekly Payments
Instead of paying once a month, pay half your monthly payment every two weeks. There are 52 weeks in a year, so you'll make 26 half-payments, which equals 13 full payments. That one extra payment per year goes 100% to principal. Check our Bi-Weekly Calculator to see the savings.
2. Extra Principal Payments
You don't need a special schedule to pay extra. Adding just $100 a month to your payment can knock years off a 30-year mortgage. Ensure you mark the extra money specifically for "Principal Only" on your check or online portal.
3. Recasting vs. Refinancing
If you come into a large sum of money (inheritance, bonus), you can make a lump-sum payment.
- Recasting: You pay a lump sum, and the lender re-amortizes the remaining balance over the same term, lowering your monthly payment.
- Refinancing: You get a new loan with a new rate and term. This costs money (closing costs) but can save you if rates have dropped.
15-Year vs. 30-Year Amortization
The loan term is the biggest factor in amortization.
| Feature | 30-Year Fixed | 15-Year Fixed |
|---|---|---|
| Monthly Payment | Lower (Affordable) | Higher (Aggressive) |
| Interest Rate | Standard | Usually Lower |
| Total Interest Paid | High (often 50%+ of loan) | Low (often <25% of loan) |
| Equity Build | Slow | Fast |
Use this calculator to compare both scenarios. Often, people take a 30-year loan for safety but make payments as if it were a 15-year loan to get the best of both worlds.
Start Planning Your Payoff
Don't just pay your mortgage—attack it. Use the tools above to find a payment strategy that fits your budget and helps you own your home free and clear sooner.