Understanding Your Amortization Schedule
Learn how mortgage amortization works, why your early payments are mostly interest, and how to use your amortization schedule to save money.
Understanding Your Amortization Schedule
Your $400,000 mortgage at 6.25% costs $2,463/month. Where does that money go?
Month 1: $2,083 goes to interest, $380 goes to principal. Month 360: $15 goes to interest, $2,448 goes to principal.
This is amortization. Let me explain how it works.
What Is Amortization?
Amortization is how your mortgage payment is divided between principal (paying down the loan balance) and interest (cost of borrowing).
Key fact: Your payment stays the same every month, but the split between principal and interest changes.
Early in the loan: Most of your payment is interest. Late in the loan: Most of your payment is principal.
View sample amortization schedule →
How Amortization Works (Month-by-Month)
Example: $400,000 loan at 6.25% for 30 years
| Month | Payment | Principal | Interest | Remaining Balance | |-------|---------|-----------|----------|-------------------| | 1 | $2,463 | $380 | $2,083 | $399,620 | | 12 | $2,463 | $403 | $2,060 | $394,982 | | 60 | $2,463 | $469 | $1,994 | $372,459 | | 120 | $2,463 | $584 | $1,879 | $326,045 | | 180 | $2,463 | $724 | $1,739 | $267,914 | | 240 | $2,463 | $898 | $1,565 | $197,342 | | 300 | $2,463 | $1,114 | $1,349 | $113,174 | | 360 | $2,463 | $2,448 | $15 | $0 |
Notice: Your payment never changes ($2,463), but in month 1 only $380 goes to principal. By month 360, almost the entire payment ($2,448) is principal.
Broker's Tip: This is why refinancing to restart a 30-year loan (when you're already 10 years in) can cost you money long-term — you're resetting the amortization clock.
Why Early Payments Are Mostly Interest
Interest is calculated on your remaining balance.
Month 1:
- Balance: $400,000
- Monthly interest rate: 6.25% ÷ 12 = 0.5208%
- Interest owed: $400,000 × 0.005208 = $2,083
- Your payment: $2,463
- Principal paid: $2,463 - $2,083 = $380
Month 120 (10 years in):
- Balance: $326,045
- Interest owed: $326,045 × 0.005208 = $1,698
- Principal paid: $2,463 - $1,698 = $765
As your balance drops, less goes to interest and more goes to principal.
Total Interest Paid Over 30 Years
On a $400,000 loan at 6.25%:
- Total payments: $2,463 × 360 months = $886,680
- Principal repaid: $400,000
- Total interest: $486,680
You pay $1.22 in interest for every $1.00 you borrow. This is normal for 30-year mortgages.
Want to pay less interest? Refinance to a 15-year mortgage or make extra principal payments.
How to Read Your Amortization Schedule
Your lender provides an amortization schedule when you close. It shows:
- Payment number (1-360 for a 30-year loan)
- Payment amount ($2,463 in our example)
- Principal portion (starts small, grows over time)
- Interest portion (starts large, shrinks over time)
- Remaining balance (drops slowly at first, quickly later)
Why this matters:
- Shows when you hit 20% equity (PMI drops off)
- Shows when you hit 50% equity (good time to cash out)
- Shows cumulative interest paid (motivates you to pay extra)
Accelerating Payoff: Extra Payments
Every dollar of extra principal saves you interest.
Example: You pay an extra $200/month toward principal.
Without extra payments:
- Payoff: 360 months (30 years)
- Total interest: $486,680
With $200/month extra:
- Payoff: 252 months (21 years)
- Total interest: $329,421
- Savings: $157,259 in interest
ROI on that $200/month: 327% over the life of the loan.
Use the extra payment calculator →
Broker's Tip: If you're planning to pay extra, ask your lender if there's a prepayment penalty (rare, but some loans have them). Also specify "apply to principal" when you make extra payments.
Refinancing Resets Your Amortization
Be careful refinancing late in your loan.
Example:
- Original loan: $400,000 at 7% in 2016
- Today (2026): You've paid for 10 years, balance is $346,000
- Remaining term: 20 years
If you refinance to a new 30-year loan:
- You're restarting the amortization clock
- Most of your payment will be interest again (for the first 10 years)
- You'll pay interest for 40 years total (10 years already paid + 30 new years)
Better option: Refinance to a 20-year loan (match your remaining term) or a 15-year loan (accelerate payoff).
Bi-Weekly Payments Hack
Pay half your mortgage every 2 weeks instead of once a month.
How it works:
- Monthly payment: $2,463
- Bi-weekly payment: $1,231.50 (half)
- You make 26 bi-weekly payments per year = 13 full monthly payments
That extra payment per year goes entirely to principal.
Result:
- Loan paid off in 25.5 years instead of 30
- Save $70,000+ in interest
Most lenders allow bi-weekly payments. Ask when you close.
Amortization on 15-Year vs 30-Year
Same loan amount ($400,000 at 6.25%):
30-year:
- Payment: $2,463/month
- Total interest: $486,680
- Month 1 split: $380 principal, $2,083 interest
15-year (rate is usually 0.5% lower, so 5.75%):
- Payment: $3,315/month
- Total interest: $196,700
- Month 1 split: $1,398 principal, $1,917 interest
15-year saves you $289,980 in interest but costs $852/month more.
Can you afford it? Use our 15 vs 30-year calculator.
Frequently Asked Questions
Q: Can I change my amortization schedule after closing?
Not without refinancing. Your schedule is locked when you close. But you CAN make extra principal payments to pay off faster.
Q: Why does my lender send me a new amortization schedule after I make an extra payment?
Because your payoff date changed. Extra principal payments shorten your loan term.
Q: Does my amortization schedule include property taxes and insurance?
No. It only shows principal + interest. Taxes and insurance are separate (even if escrowed).
Q: Can I see my amortization schedule online?
Most lenders have online portals where you can view your schedule. Or use our amortization calculator to generate one.
Q: What if I refinance — do I get a new amortization schedule?
Yes. Your new lender provides a new schedule based on your new loan amount, rate, and term.
Next Steps
View your amortization schedule:
Use the amortization calculator →
Want to refinance and start a new schedule?
I'm a California licensed mortgage broker with 15+ years experience (DRE #01212512).
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About the Author
Bill McCoy
Bill is a licensed mortgage broker with over 15 years of experience helping homeowners save money through refinancing. He specializes in analyzing market trends and finding the best loan options for each client's unique situation.
CA DRE #01212512 | NMLS #[number]