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Mortgage Amortization Schedule
An amortization schedule shows how a loan is gradually repaid over time. Each payment is divided into two parts:
- Interest – the cost of borrowing the money
- Principal – the portion that reduces the loan balance
At the beginning of a mortgage, a larger share of the payment goes toward interest. Over time, more of each payment goes toward reducing the principal balance.
Example Amortization Overview
Mortgage Calculator II bankrate mortgage calculator II mortgage payment calculator
Loan Balance Over Time$600K |
$500K |
$400K |***********
$300K |**************
$200K |*********************
$100K |*******************************
$0 |************************************
0 5 10 15 20 25 30 Years
The graph illustrates how the loan balance steadily declines as payments are made across a 30-year mortgage term.
Annual Loan Repayment Table
| Year | Date Range | Interest Paid | Principal Paid | Remaining Balance |
|---|---|---|---|---|
| 1 | Mar 26 – Feb 27 | $20,121 | $3,700 | $316,300 |
| 2 | Mar 27 – Feb 28 | $19,880 | $3,941 | $312,359 |
| 3 | Mar 28 – Feb 29 | $19,624 | $4,197 | $308,162 |
| 4 | Mar 29 – Feb 30 | $19,351 | $4,470 | $303,692 |
| 5 | Mar 30 – Feb 31 | $19,060 | $4,761 | $298,931 |
| 6 | Mar 31 – Feb 32 | $18,750 | $5,071 | $293,860 |
| 7 | Mar 32 – Feb 33 | $18,420 | $5,401 | $288,459 |
| 8 | Mar 33 – Feb 34 | $18,069 | $5,752 | $282,707 |
| 9 | Mar 34 – Feb 35 | $17,694 | $6,127 | $276,580 |
| 10 | Mar 35 – Feb 36 | $17,296 | $6,525 | $270,054 |
| 11 | Mar 36 – Feb 37 | $16,871 | $6,950 | $263,104 |
| 12 | Mar 37 – Feb 38 | $16,419 | $7,402 | $255,702 |
| 13 | Mar 38 – Feb 39 | $15,937 | $7,884 | $247,818 |
| 14 | Mar 39 – Feb 40 | $15,424 | $8,397 | $239,421 |
| 15 | Mar 40 – Feb 41 | $14,878 | $8,944 | $230,477 |
| 16 | Mar 41 – Feb 42 | $14,296 | $9,525 | $220,952 |
| 17 | Mar 42 – Feb 43 | $13,676 | $10,145 | $210,807 |
| 18 | Mar 43 – Feb 44 | $13,016 | $10,806 | $200,001 |
| 19 | Mar 44 – Feb 45 | $12,312 | $11,509 | $188,492 |
| 20 | Mar 45 – Feb 46 | $11,564 | $12,258 | $176,235 |
| 21 | Mar 46 – Feb 47 | $10,766 | $13,055 | $163,179 |
| 22 | Mar 47 – Feb 48 | $9,916 | $13,905 | $149,275 |
| 23 | Mar 48 – Feb 49 | $9,011 | $14,810 | $134,465 |
| 24 | Mar 49 – Feb 50 | $8,048 | $15,773 | $118,691 |
| 25 | Mar 50 – Feb 51 | $7,021 | $16,800 | $101,892 |
| 26 | Mar 51 – Feb 52 | $5,928 | $17,893 | $83,999 |
| 27 | Mar 52 – Feb 53 | $4,764 | $19,057 | $64,941 |
| 28 | Mar 53 – Feb 54 | $3,524 | $20,298 | $44,644 |
| 29 | Mar 54 – Feb 55 | $2,203 | $21,618 | $23,025 |
| 30 | Mar 55 – Feb 56 | $796 | $23,025 | $0 |
By the end of year 30, the entire loan balance is paid off.
What Is a Mortgage?
A mortgage is a loan used to purchase real estate, typically a house. The lender provides funds for the purchase, and the borrower agrees to repay the loan in installments over a long period, commonly 15 to 30 years.
Each monthly payment usually includes:
- A portion that reduces the loan principal
- An interest charge for borrowing the money
Some mortgages also include payments placed in an escrow account to cover property taxes and insurance.
Ownership of the property is fully transferred to the borrower once the mortgage has been completely repaid.
Main Elements of a Mortgage
1. Loan Amount
This is the total amount borrowed from the lender. It equals the home price minus the buyer’s down payment.
2. Down Payment
The initial payment made by the buyer toward the home purchase. Lenders often prefer at least 20% of the purchase price, though smaller down payments may be accepted.
3. Loan Term
The length of time allowed to repay the loan. Typical terms include:
- 15 years
- 20 years
- 30 years
Shorter terms generally have lower interest rates but higher monthly payments.
4. Interest Rate
This represents the cost of borrowing money. Mortgage interest may be:
- Fixed-rate: the rate remains the same throughout the loan
- Adjustable-rate: the rate may change periodically
Rates are usually expressed as Annual Percentage Rate (APR).
Ongoing Costs of Homeownership
Owning a home involves expenses beyond the mortgage payment.
Recurring Costs
These occur regularly during the life of the loan.
Property Taxes
Taxes paid to local governments based on the property’s value.
Home Insurance
Coverage that protects the home and owner from damage or liability.
Private Mortgage Insurance (PMI)
Required when the down payment is less than 20% of the home value.
Homeowners Association (HOA) Fees
Monthly or annual charges in communities managed by an association.
Maintenance and Utilities
Regular upkeep, repairs, and utility bills.
One-Time Costs
These expenses occur mainly when purchasing the home.
Closing Costs
Fees associated with completing the real estate transaction, including legal, appraisal, and processing costs.
Renovation Expenses
Costs for repairs or improvements before moving in.
Moving and Setup Costs
Furniture purchases, appliances, and relocation expenses.
Strategies for Paying Off a Mortgage Faster
Borrowers sometimes aim to reduce the loan duration and interest costs.
Extra Payments
Making additional payments reduces the principal faster and lowers total interest paid.
Biweekly Payments
Instead of one monthly payment, half the payment is made every two weeks. This results in one extra payment each year.
Refinancing
Borrowers may replace their existing mortgage with a new loan that has a shorter term or better interest rate.
Advantages of Early Repayment
- Lower total interest costs
- Faster debt elimination
- Greater financial flexibility after the loan is cleared
Potential Downsides
- Some lenders charge prepayment penalties
- Money used to pay down the mortgage cannot be invested elsewhere
- Tax deductions related to mortgage interest may decrease