Amortization Schedule Explained: Reading Your Loan Table
An amortization schedule explained column by column, with a worked first-three-months example on a $300,000 mortgage at 6.5% and how extra payments change the table.
What the table actually is
An amortization schedule is a row-per-payment map of a fixed-rate loan. The payment amount never changes; what changes is how it splits between interest and principal.
Each row has four numbers that matter:
| Column | What it means |
|---|---|
| Payment | The fixed total you send that month |
| Interest | Last month's balance x (annual rate / 12) |
| Principal | Payment minus interest — the part that reduces the debt |
| Balance | Previous balance minus principal |
Interest is always calculated first, on the balance you owed at the start of the period. Principal is the leftover. That single ordering explains everything else about the table.
Worked example: $300,000 at 6.5% for 30 years
Monthly rate = 0.065 / 12 = 0.00541667. Using the standard payment formula, the payment is $1,896.20.
| Month | Payment | Interest | Principal | Balance |
|---|---|---|---|---|
| 1 | $1,896.20 | $1,625.00 | $271.20 | $299,728.80 |
| 2 | $1,896.20 | $1,623.53 | $272.67 | $299,456.13 |
| 3 | $1,896.20 | $1,622.05 | $274.15 | $299,181.98 |
Month 1 interest: 300,000 x 0.00541667 = $1,625.00. Principal: 1,896.20 - 1,625.00 = $271.20.
Month 2 interest is computed on $299,728.80, which is $1.47 less — so $1.47 more goes to principal. That tiny shift compounds every month.
Why the split flips over time
Because interest is charged on a shrinking balance, the principal portion grows geometrically. On this loan:
| Payment number | Principal share |
|---|---|
| 1 | 14% |
| 60 (year 5) | 19% |
| 180 (year 15) | 38% |
| 300 (year 25) | 74% |
| 360 (final) | 99% |
You cross the halfway point — where more of the payment goes to principal than interest — around month 220, or year 18. Total interest over 30 years: about $382,600, more than the house price itself.
How extra payments show up
An extra payment applied to principal skips rows. Add $200/month to the example and each row's balance drops faster, so every future interest figure is smaller. The loan clears in about 24 years instead of 30, and total interest falls by roughly $93,000.
Two things to check with your servicer: that extra money is applied to *principal* and not held as a prepaid next payment, and that there is no prepayment penalty.
A lump sum works the same way but front-loaded — $10,000 applied in year 2 is far more valuable than the same $10,000 in year 20, because it removes 28 years of interest instead of eight.
FAQ
Why is most of my mortgage payment going to interest? Because interest is charged on the outstanding balance, and early on that balance is nearly the full loan. The share shifts automatically as the balance falls.
Does making one extra mortgage payment a year really help? Yes. One extra monthly payment per year on a 30-year loan typically cuts about four to five years and tens of thousands in interest.
What is negative amortization? When the payment does not cover the month's interest, the shortfall is added to the balance and the loan grows. It appears in some adjustable and income-driven repayment plans.
Generate your full table with the Amortization Calculator, and test extra payments with the Mortgage Payoff Calculator. For the derivation of the payment itself, see how mortgage amortization works.
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*See every row of your own loan with the Amortization Calculator.*