Here’s everything you need to know about mortgage amortization, including how a typical amortization schedule is laid out, how to calculate amortization, and how it affects the makeup of each mortgage payment.

What an amortization schedule looks like

When you first take out a mortgage, the majority of each monthly payment will go toward interest. Later, as you near the end of your mortgage term, most of your payment will go toward reducing your principal debt.

The amortization tables below give tastes of how your amortization schedule would look if you took out a $100,000 mortgage with an interest rate of 4%, amortized over a period of 30 years.

You can see how the interest/principal mix is much different during the first year than during the 30th year.

First-year amortization schedule for a $100,000, 30-year mortgage
Month Payment amount Interest Principal Remaining balance
1 $477.42 $333.33 $144.09 $99,855.91
2 $477.42 $332.85 $144.57 $99,711.34
3 $477.42 $332.37 $145.05 $99,566.29
4 $477.42 $331.89 $145.53 $99,420.76
5 $477.42 $331.40 $146.02 $99,274.74
6 $477.42 $330.92 $146.50 $99,128.24
7 $477.42 $330.43 $146.99 $98,981.25
8 $477.42 $329.94 $147.48 $98,833.77
9 $477.42 $329.45 $147.97 $98,685.80
10 $477.42 $328.95 $148.47 $98,537.33
11 $477.42 $328.46 $148.96 $98,388.37
12 $477.42 $327.96 $149.46 $98,238.91

And here's a look at how your monthly payment dollars are distributed during the last year of the mortgage.

Final-year amortization schedule for a $100,000, 30-year mortgage
Month Payment amount Interest Principal Remaining balance
349 $477.42 $18.68 $458.74 $5,144.96
350 $477.42 $17.15 $460.27 $4,684.69
351 $477.42 $15.62 $461.80 $4,222.89
352 $477.42 $14.08 $463.34 $3,759.55
353 $477.42 $12.53 $464.89 $3,294.66
354 $477.42 $10.98 $466.44 $2,828.22
355 $477.42 $9.43 $467.99 $2,360.23
356 $477.42 $7.87 $469.55 $1,890.68
357 $477.42 $6.30 $471.12 $1,419.56
358 $477.42 $4.73 $472.69 $946.87
359 $477.42 $3.16 $474.26 $472.61
360 $477.42 $1.58 $475.84 $0.00

As you can see, your monthly payment, including both interest and principal, will always total around $477.

With your first payment, $333 goes to interest and $144 goes to principal. With your final payment, less than $2 goes toward interest and about $476 is devoted to principal.

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How do you calculate amortization?

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Your amortized monthly payment is based on the size of your loan, your interest rate, and the length of your mortgage term.

You can calculate the payment on your own, but we have to warn you: There is math involved — and it's complicated math.

First, determine your monthly interest rate by taking your annual rate and dividing by 12. We'll call the result "R."

Add 1 to R, then raise that sum to the power of N, where N stands for the total number of monthly payments. (For a 30-year mortgage, N would equal 360.)

Take the product of that equation and multiply by R — then multiple that amount by your loan principal, or "P."

Let's call your result "X."

Still following? We warned you it was complicated. Next you add 1 plus R again, raise it to the power of N once more — and this time take the product of the equation and subtract 1. We'll call this result "Y."

Divide X by Y and you'll have your monthly payment. See how, er, easy it is?

Using an online mortgage calculator

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Minerva Studio / Shutterstock

If by this point you're feeling a panic attack coming on as you flash back to high school algebra, don't worry. There’s a much easier way to figure out your amortization schedule: Use our handy mortgage payoff calculator, which provides an amortization table.

With a mortgage calculator, you can find out:

  • How much total interest you’ll pay over the course of your loan.
  • How much of your payment will go toward interest and principal each month.
  • What your loan balance will be after each monthly payment.

A mortgage amortization calculator also can help you compare the total cost of borrowing for different mortgage terms — a 30-year mortgage versus a 15-year fixed-rate mortgage, for example.

Another perk of using a mortgage calculator is if you've been burdened with pesky private mortgage insurance, you can see the point where your equity in the home will reach 20% of the house's value. Once you get there, you can cancel PMI — and reduce your monthly payment.

Plus, the calculator shows how much you could save on interest by making additional principal payments: adding a little extra to every monthly payment to shave years off your mortgage term and pay off your loan faster.

For example, if you boosted your monthly payments by $200 on a $100,000, 30-year fixed-rate mortgage at 4% interest, you'd pay off your loan 13 years sooner than if you were to stick with the standard payment plan.

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How does mortgage amortization help you?

Amortization provides a schedule for paying off your mortgage and interest over a predetermined amount of time.

Your loan balance will decrease gradually and you’ll build equity slowly as you make your payments, though your equity will gain momentum as you near the end of your loan period.

Again, you can keep your monthly payments down by comparison shopping for your loan and making sure you lock in the best interest rate you possibly can.

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About the Author

Shane Murphy

Shane Murphy

Reporter

Shane is a reporter for MoneyWise. He holds a bachelor’s degree in English Language & Literature from Western University and is a graduate of the Algonquin College Scriptwriting program.

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