How Mortgage Amortization Works
Your mortgage payment stays the same every month, but what it pays for changes. Early on, most of it is interest; by the end, almost all of it pays down the loan. Here’s why, with a real schedule.
By Bogdan · Updated
Every fixed-rate mortgage payment is the same amount — but inside it, the mix of interest and principal changes every single month. That shifting mix is called amortization.
Explain it like I’m 5
Imagine you owe a friend 100 marbles, and every week you hand over 10 marbles. But first, your friend takes a “fee” marble for every 10 you still owe.
- Week 1: you owe 100, so the fee is 10 marbles. All 10 go to the fee — you barely pay anything back!
- Later: you owe only 40, so the fee is 4. Now 6 of your 10 marbles actually pay back what you owe.
- Near the end: the fee is tiny, and almost every marble pays off the loan.
Same 10 marbles each week — but where they go keeps changing.
Build your own year-by-year amortization schedule with the mortgage calculator.
A real schedule
A $320,000 loan at 6.5% for 30 years has a payment of $2,022.62 a month.
| Month | Interest | Principal | Still owed |
|---|---|---|---|
| 1 | $1,733.33 | $289.28 | ~$319,700 |
| 12 | $1,715.62 | $307.00 | ~$316,400 |
| 60 (year 5) | $1,624.75 | $397.87 | ~$299,600 |
| 120 (year 10) | $1,472.43 | $550.18 | ~$271,300 |
| 180 (year 15) | $1,261.81 | $760.80 | ~$232,200 |
| 240 (year 20) | $970.56 | $1,052.05 | ~$178,100 |
| 300 (year 25) | $567.82 | $1,454.80 | ~$103,400 |
| 360 | $10.90 | $2,011.72 | $0 |
Notice: after 15 years — half the loan — you still owe about 73% of what you borrowed. Principal doesn’t overtake interest until about year 20.
The formula
Each month:
- Interest = balance × (yearly rate ÷ 12)
- Principal = payment − interest
- New balance = balance − principal
The fixed payment itself comes from the standard formula: loan × r ÷ (1 − (1 + r)−n), where r is the monthly rate and n the number of payments.
What this means for you
- Selling early? You’ll have paid down less than you might expect — most early payments were interest.
- Extra payments early are powerful. They cut the balance when interest is highest. See how to pay off your mortgage early.
- Refinancing restarts the clock. A new 30-year loan puts you back at the interest-heavy start.
- Shorter loans amortize faster. See 15-year vs. 30-year mortgage.
- PMI ends sooner when principal comes down faster — see what is PMI.
Frequently asked questions
What is mortgage amortization?
Paying off a loan through equal monthly payments, each split between interest and principal. The split changes over time: interest starts high and shrinks, while the principal part grows, until the balance reaches zero at the end of the term.
Why is most of my mortgage payment going to interest?
Interest is charged on the balance you still owe, and that balance is largest at the start. On a $320,000 loan at 6.5%, the first month’s interest is $1,733 of a $2,023 payment. As the balance falls, so does the interest.
When does more of my payment go to principal than interest?
On a 30-year loan at 6.5%, not until year 20. At lower rates the crossover comes sooner, and on a 15-year loan at the same rate it comes in year 5.
What is an amortization schedule?
A table showing, for each month or year, how much of your payment goes to interest, how much to principal, and how much you still owe. Lenders provide one, and the mortgage calculator on this site builds one for you.
How do extra payments change amortization?
Extra payments go straight to principal. A lower balance means less interest next month, so more of every later payment goes to principal too. The loan ends early and total interest falls.
This article is for general education and is not financial, investment or tax advice. Rates, rules and limits change; check current terms with your bank or the IRS. See our disclaimer.