How to Read an Amortization Schedule
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An amortization schedule is a table of every payment on a fixed-rate loan. Each row shows the payment, the interest (balance × annual rate ÷ 12), the principal (payment − interest) and the balance left. Early rows are mostly interest; later rows are mostly principal.
Example: on $200,000 at 6% over 30 years, the payment is $1,199.10. In month 1, $1,000.00 is interest and $199.10 is principal.
Lenders and calculators often give you an amortization schedule, a long table showing how a loan is paid off one payment at a time. It can look overwhelming, but every row is worked out the same way. Once you can read one row, you can read the whole table and see exactly where your money goes.
The columns
- Payment number or date: which month the row covers.
- Payment: the fixed amount you pay each month. On a standard fixed-rate loan it stays the same, apart from a small adjustment to the final payment.
- Interest: the part of the payment that pays for borrowing this month.
- Principal: the part that actually reduces what you owe.
- Balance: what you still owe after the payment.
Some schedules add running totals for interest and principal paid so far.
The formulas
Interest this month = previous balance × r
Principal this month = M − interest
New balance = previous balance − principal
r = annual rate ÷ 12 ÷ 100, n = number of monthly payments
Worked example: $200,000 at 6% for 30 years
The monthly rate is 6 ÷ 12 ÷ 100 = 0.005 and there are 360 payments, so the payment is $1,199.10. The first three rows are:
| Month | Payment | Interest | Principal | Balance |
|---|---|---|---|---|
| 1 | $1,199.10 | $1,000.00 | $199.10 | $199,800.90 |
| 2 | $1,199.10 | $999.00 | $200.10 | $199,600.80 |
| 3 | $1,199.10 | $998.00 | $201.10 | $199,399.71 |
Month 1 interest is $200,000 × 0.005 = $1,000.00. The other $199.10 reduces the balance to $199,800.90. In month 2, interest is charged on that slightly lower balance, so it falls by about a dollar and the principal rises by the same amount. That small shift repeats every month.
Reading the whole schedule
- After year 1: the balance is about $197,544, so twelve payments totalling $14,389.21 have reduced the debt by only about $2,456.
- The crossover point: principal becomes larger than interest from payment 223, more than 18 years in.
- Total interest: over all 360 payments, you pay about $231,676 in interest on top of the $200,000 borrowed.
This is why early payments feel like they barely touch the balance. Interest is charged on what you still owe, and at the start you owe the most.
What an extra payment does
Any extra amount you pay goes straight to principal, as long as your lender applies it that way. That lowers the balance, so every later month has less interest and more principal. In the example, paying an extra $100 a month clears the loan in 295 payments instead of 360, about five and a half years sooner, and cuts total interest by roughly $49,138.
The earlier the extra payment, the bigger the effect, because it removes interest from every remaining month.
Why your lender's schedule may differ slightly
- Rounding to the cent each month, and a final payment adjusted to clear the balance exactly.
- Daily interest instead of monthly, which makes interest vary with the number of days in each month.
- Property tax, insurance or fees added to the monthly bill but not to the loan.
- A variable rate. When the rate changes, the lender recalculates the payment or the term from that point.
Common mistakes
- Reading the payment as the amount your debt goes down by. Only the principal column reduces it.
- Assuming interest is spread evenly over the term. It is front-loaded.
- Using a flat-rate loan quote in an amortizing schedule. Convert it first with the flat rate to EIR calculator.
- Making extra payments without checking that the lender applies them to principal and has no prepayment fee.
Build your own schedule with the amortization schedule calculator, including extra monthly payments.
Frequently asked questions
What is an amortization schedule?
A table that lists every payment on a fixed-rate loan, splitting each into interest and principal and showing the balance left after each payment.
How is the interest in each payment calculated?
Multiply the balance before the payment by the annual rate and divide by 12. On a $200,000 balance at 6%, the first month’s interest is $1,000.
Why does so much of my early payment go to interest?
Interest is charged on the outstanding balance, which is highest at the start. As the balance falls, less of each fixed payment goes to interest and more to principal.
How much do extra payments save?
On $200,000 at 6% over 30 years, an extra $100 a month pays the loan off in 295 payments instead of 360 and saves about $49,138 of interest.
Why does my lender’s schedule differ from a calculator?
Lenders may round each month, charge daily interest, adjust the final payment, or include tax and insurance in the bill.
Related tools
- Build your own month-by-month table with the amortization schedule calculator.
- Amortization schedule calculator — full schedule with extra payments.
- Loan calculator — monthly payment and total interest.
- Mortgage calculator — payment including tax and insurance.
- Flat rate to EIR calculator — convert a flat-rate quote first.
Related guides
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