Amortization is the schedule that shows how every payment is divided between interest and principal. On a fixed-rate mortgage, interest is charged on the outstanding balance, so the balance is at its highest at the start. That is why early payments are mostly interest and later payments are mostly principal.
The split in the very first payment
Take the $300,000 loan at 6% for 30 years. The payment is $1,798.65. Interest for month one is 300,000 × 0.005 = $1,500. The remaining 1,798.65 − 1,500 = $298.65 goes to principal. Only about 17% of your first payment reduces the debt — the other 83% is the cost of borrowing.
How the balance falls over time
| Year | Remaining balance | Principal repaid | Interest paid so far |
|---|---|---|---|
| 0 | $300,000 | $0 | $0 |
| 5 | $279,163 | $20,837 | $87,082 |
| 10 | $251,057 | $48,943 | $166,895 |
| 15 | $213,147 | $86,853 | $236,904 |
| 20 | $162,011 | $137,989 | $293,687 |
| 25 | $93,036 | $206,964 | $332,632 |
| 30 | $0 | $300,000 | $347,515 |
After ten years and roughly $216,000 of payments, you have repaid less than $49,000 of the original loan. The crossover — the point where the principal share of each payment finally exceeds the interest share — does not arrive until around year 17.
Extra payments and early payoff
Because interest is charged on the balance, any extra dollar paid today removes interest from every future month. Paying an extra $201.35 to round the payment to $2,000 in month one sends the full extra amount to principal, shortening the term and saving thousands in interest over the life of the loan.
Extra payments work best early, before the balance has fallen. Use our amortization calculator to build your own full schedule with extra payments, and read what you actually pay on a loan to see the total-cost picture.
How to read an amortization schedule
Each row shows the payment number, the interest portion, the principal portion, and the balance that remains. Add the interest column down the page and you get the lender's total revenue from your loan; add the principal column and you land back on the amount borrowed. The two always meet at zero on the final row.
Fixed vs adjustable rates
The tidy split above assumes a fixed rate. With an adjustable-rate mortgage the interest portion can jump when the rate resets, so a larger share of each payment goes to interest and the principal repayment slows down, sometimes leaving the balance barely falling at all.