How Does a Mortgage Amortization Schedule Work?
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An amortization schedule separates each loan payment into interest, principal and the remaining balance. The payment can stay fixed while that split changes: interest is calculated on a balance that gets smaller. Our Amortization Calculator displays annual totals and compares balances with and without a recurring extra payment.
A worked monthly schedule
Assume a new $350,000 loan, a fixed 7% annual interest rate and 360 monthly payments. These are example assumptions, not a market quote. The principal-and-interest payment is $2,328.56; total modeled interest is $488,281.14. Taxes, insurance, HOA charges and mortgage insurance are separate.
| Month | Interest | Principal | Balance after payment |
|---|---|---|---|
| 1 | $2,041.67 | $286.89 | $349,713.11 |
| 60 | $1,924.21 | $404.35 | $329,460.56 |
| 180 | $1,515.96 | $812.60 | $259,066.03 |
| 242 | $1,163.12 | $1,165.44 | $198,226.15 |
| 300 | $695.51 | $1,633.05 | $117,596.86 |
| 360 | $13.50 | $2,315.05 | $0.00 |
In this example, principal first exceeds interest in month 242, not year 25. This crossover is not universal: the rate and term determine it. More interest early in a loan is the arithmetic consequence of a larger outstanding balance, not an extra charge that must be paid even if you repay early.
How an extra monthly payment changes payoff
The following extras begin with the first payment and are applied to principal after that month's interest. The last payment is reduced to the amount owed.
| Extra per month | Payments to payoff | Total interest | Interest saved |
|---|---|---|---|
| $0.00 | 360 | $488,281.14 | $0.00 |
| $100.00 | 316 | $416,978.74 | $71,302.40 |
| $300.00 | 258 | $327,592.19 | $160,688.96 |
| $500.00 | 220 | $272,198.89 | $216,082.26 |
For example, $300 extra gives 258 payments. Small rounding differences between a lender and this model are possible because we retain full precision internally and round displayed dollars.
Read the annual table correctly
The calculator's Payment, Principal and Interest columns describe the original schedule. With an extra payment, the additional Balance with extra column describes the accelerated balance. It is not a second set of payment totals. The chart shows year-end balances, including the final partial year; the guide above selects months from the underlying model.
What this estimate leaves out
This is a fixed-rate, monthly-interest illustration. It does not forecast adjustable rates, daily-interest servicing, late fees, payment holidays or a lender's rounding rules. Principal paid is not the same as home equity: equity also depends on the property's current value. A balance threshold alone does not establish that mortgage insurance can be cancelled.
Before paying extra, confirm how your servicer allocates it, whether any fee or prepayment penalty applies, and whether it changes the due date instead of reducing principal. See extra-payment comparisons and the monthly-payment formula.