Mortgage Amortization
See your full mortgage amortization schedule, principal vs interest by month, plus total interest paid.
Formula
Each payment = Principal + Interest portions
Each payment covers interest on remaining balance first, with the rest reducing principal. Over time, interest portion decreases and principal portion increases.
Worked Examples
Example 1: First Year Amortization
Problem:$300,000 mortgage at 6.5% for 30 years. Show first year breakdown.
Solution:Monthly payment: $1,896\n\nMonth 1:\nInterest: $300,000 × 6.5%/12 = $1,625\nPrincipal: $1,896 - $1,625 = $271\nBalance: $299,729\n\nMonth 6:\nInterest: $298,365 × 6.5%/12 = $1,616\nPrincipal: $280\nBalance: $298,085\n\nMonth 12:\nInterest: $296,947 × 6.5%/12 = $1,609\nPrincipal: $287\nBalance: $296,660\n\nYear 1: Paid $22,752, only $3,340 to principal!
Result:Only 14.7% of Year 1 payments reduce principal
Example 2: Compare Terms
Problem:$250,000 at 6.5%. Compare 15-year vs 30-year amortization.
Solution:30-Year Mortgage:\nPayment: $1,580/month\nTotal payments: $568,861\nTotal interest: $318,861\n\n15-Year Mortgage:\nPayment: $2,179/month\nTotal payments: $392,169\nTotal interest: $142,169\n\nDifference:\n15-year costs $599/month more\n15-year saves $176,692 in interest!\n\nIf you can afford $2,179, take the 15-year.
Result:15-year saves $176,692
Example 3: Extra Payment Impact
Problem:$350,000 mortgage, 6.5%, 30 years. Add $200/month extra.
Solution:Without extra payments:\nPayoff: 360 months (30 years)\nTotal interest: $446,344\n\nWith $200/month extra:\nPayoff: 279 months (23.3 years)\nTotal interest: $320,874\n\nImpact:\nPay off 6.75 years early\nSave $125,470 in interest\nTotal extra paid: $55,800\n\nReturn on that $200/month: 225%!
Result:6.75 years early, save $125K
Frequently Asked Questions
What is mortgage amortization?
Amortization is the process of paying off a mortgage through regular payments that cover both interest and principal. Each payment reduces the loan balance slightly, and over time, more of each payment goes to principal as interest decreases.
What's the benefit of a 15-year vs 30-year mortgage?
15-year: Higher monthly payment but much less total interest (often 50-60% less). 30-year: Lower payment but more flexibility. Example: $300K at 6.5% - 30-year pays $383K interest; 15-year pays $165K. Save $218K with shorter term.
How do extra payments affect amortization?
Extra payments go directly to principal, reducing balance faster. This creates a snowball effect - lower balance means less interest, so regular payments apply more to principal. Even $100/month extra can shave years off a mortgage.
What is negative amortization?
When payments don't cover the interest due, unpaid interest adds to the loan balance. The loan grows instead of shrinking. Avoid loans with this feature (some adjustable-rate mortgages). Your balance should never increase.