Amortization Schedule Explained — Mortgage Amortization Calculator 2026
Learn how mortgage amortization works and how extra payments can save you thousands.
What Is Mortgage Amortization?
Mortgage amortization is the process of paying down your loan over time through fixed monthly payments. Each payment is split into two parts: interest, which is the cost of borrowing, and principal, which reduces the amount you owe. Early in the loan, most of your payment goes to interest; later, most goes to principal.
How to Read an Amortization Schedule
An amortization schedule lists every payment for the life of your loan. For each month it shows your payment, how much is interest, how much is principal, and your remaining balance. Here is an example for a $300,000 loan at 6% for 30 years:
Example: First 12 Months of a $300,000 Loan
Below are the first twelve months of a $300,000, 30-year loan at 6% with a monthly payment of $1,798.65:
| Month | Payment | Principal | Interest | Balance |
|---|---|---|---|---|
| 1 | $1,798.65 | $298.65 | $1,500.00 | $299,701.35 |
| 2 | $1,798.65 | $300.14 | $1,498.51 | $299,401.21 |
| 3 | $1,798.65 | $301.64 | $1,497.01 | $299,099.57 |
| 4 | $1,798.65 | $303.15 | $1,495.50 | $298,796.42 |
| 5 | $1,798.65 | $304.67 | $1,493.98 | $298,491.75 |
| 6 | $1,798.65 | $306.19 | $1,492.46 | $298,185.56 |
| 7 | $1,798.65 | $307.72 | $1,490.93 | $297,877.84 |
| 8 | $1,798.65 | $309.26 | $1,489.39 | $297,568.58 |
| 9 | $1,798.65 | $310.80 | $1,487.85 | $297,257.78 |
| 10 | $1,798.65 | $312.36 | $1,486.29 | $296,945.42 |
| 11 | $1,798.65 | $313.92 | $1,484.73 | $296,631.50 |
| 12 | $1,798.65 | $315.49 | $1,483.16 | $296,316.01 |
How Extra Payments Reduce Interest
When you make an extra payment toward principal, the balance drops faster and future interest is calculated on a smaller amount. For example, an extra $100 per month on the loan above can shorten the term by several years and save tens of thousands of dollars in interest.
Amortization Formula
The monthly payment for a fixed-rate mortgage is calculated with the formula below, where M is the monthly payment, P is the principal, r is the monthly interest rate, and n is the number of payments:
M = P × [ r(1 + r)^n ] / [ (1 + r)^n − 1 ]
Frequently Asked Questions
What is a mortgage amortization schedule?
A mortgage amortization schedule is a table that shows each monthly payment, broken into the portion that goes toward interest and the portion that goes toward paying down your principal balance over the life of the loan.
How do extra mortgage payments save money?
Extra payments go straight to your principal balance, which reduces the balance that future interest is calculated on. Even small extra payments can shorten your loan term and save thousands in interest.
Is amortization interest calculated daily?
Most mortgages use simple interest calculated on your remaining principal balance each month. Your payment is fixed, but the interest-to-principal ratio changes over time as the balance declines.