What Is Mortgage Amortization? | Bankrate

Key takeaways

Mortgage loan amortization refers to how you repay your mortgage balance over the loan term.
At the beginning of your loan term, more of your payment goes toward interest, but this reverses closer to the end of the term.
You can use your amortization schedule to find the best repayment strategy for your needs.

What you need to know about mortgage amortization

Mortgage amortization describes the process by which a borrower makes installment payments toward a loan balance over a set period. These payments are divided between principal (the amount borrowed) and interest (the amount the lender charges to borrow the funds).

The longer the loan amortization period, the lower your monthly payment — this is because your amount owed is spread over a longer term. That might seem like a positive, but it also means that you’ll spend more money on interest over a long repayment term.

Plus, interest payments are front-loaded on mortgage loans. This means it takes a significant amount of time to reduce the principal and build equity in your home — a factor to consider when comparing your loan options.

Loan term vs. loan amortization

A loan’s term and a loan’s amortization period are similar, but they describe different things. The loan’s term describes the amount of time you have to pay off a loan, while an amortization schedule describes the composition of each payment. Mortgages often have a 30-year term and a 30-year amortization schedule, but that’s not always the case.

How amortization works with fixed-rate mortgages

With a fixed-rate mortgage, the monthly principal-and-interest payments remain the same throughout the loan’s term. However, each time you make a payment, the amount of the payment that goes to the principal differs from the amount that gets applied to interest — and this balance shifts a bit with each payment.

As your mortgage ages, your fixed monthly payment stays the same, but the ‘slice’ of that payment dedicated to interest shrinks, while the portion used to build equity grows. Your early years of repayment are spent primarily covering interest costs, while your final payments are almost entirely focused on wiping out the remaining principal.

How amortization works with adjustable-rate mortgages

On the other hand, an adjustable-rate mortgage (ARM) comes with a fixed interest rate for an initial period, usually between three and 10 years. After that, your rate — and, therefore, your monthly mortgage payment — will change every six or 12 months, depending on the type of ARM you have.

Like fixed-rate mortgages, you’ll pay a bigger chunk toward the interest at first. Over time, this will shift, so more of your payment goes toward the loan principal.

Mortgage amortization key terms

Amortization schedule: A mortgage amortization schedule is a list of all the payment installments and their respective dates, most easily made with an amortization calculator. You might find your mortgage amortization schedule by logging into your lender’s portal or website and accessing your loan information online. In some cases, you may need to contact your lender to request it.
Annual Percentage Rate (APR): Compared to the interest rate on the mortgage, the annual percentage rate (APR) is a broader measure of your cost of borrowing money. The APR reflects the interest rate plus any points, mortgage broker fees and other charges that you pay to get the loan. The APR is almost always higher than the interest rate.
Loan term: This is the length of the loan. The most common mortgage term is 30 years, but 15-year terms are also popular.
Principal: This is the amount you borrowed. For instance, if you took out a $400,000 mortgage, your principal balance is $400,000, and does not include any accumulating interest. You pay down some of that principal with each monthly payment.

How do you calculate mortgage amortization?

Bankrate’s amortization calculator can help you understand how your payments break down over the life of your mortgage. To use the calculator, you’ll need to input a few details about your mortgage, including:

Principal loan amount
Loan term (such as 30 years)
Loan start date
Interest rate
The amount and frequency of extra payments, if applicable

With this information, the calculator can tell you how much principal and interest you’ll pay in any given monthly payment and how much principal and interest you’ll have paid by a specific date.

Mortgage amortization schedule example

Let’s assume you took out a 30-year, fixed-rate mortgage for $400,000 at 6.7%. At those terms, your monthly mortgage payment — including principal and interest — would be about $2,581, and the total interest over 30 years would be $529,200.

Here’s what your loan amortization schedule would look like in the first year of the loan term:

Date	Principal	Interest	Balance	Interest paid to date	Principal paid to date
February 2026	$347.78	$2,233.33	$399,652.22	$2,233.33	$347.78
March 2026	$349.72	$2,231.39	$399,302.50	$4,464.72	$697.50
April 2026	$351.67	$2,229.44	$398,950.83	$6,694.16	$1,049.17
May 2026	$353.64	$2,227.48	$398,597.19	$8,921.64	$1,402.81
June 2026	$355.61	$2,225.50	$398,241.58	$11,147.14	$1,758.42
July 2026	$357.60	$2,223.52	$397,883.98	$13,370.66	$2,116.02
August 2026	$359.59	$2,221.52	$397,524.39	$15,592.18	$2,475.61
September 2026	$361.60	$2,219.51	$397,162.79	$17,811.69	$2,837.21
October 2026	$363.62	$2,217.49	$396,799.17	$20,029.18	$3,200.83
November 2026	$365.65	$2,215.46	$396,433.52	$22,244.64	$3,566.48
December 2026	$367.69	$2,213.42	$396,065.83	$24,458.06	$3,934.17

Here’s what your amortization schedule would look like in the final year:

Date	Principal	Interest	Balance	Interest paid to date	Principal paid to date
February 2055	$2,400.89	$180.22	$29,877.95	$528,104.9	$370,122.05
March 2055	$2,414.29	$166.82	$27,463.66	$528,271.72	$372,536.34
April 2055	$2,427.77	$153.34	$25,035.89	$528,425.06	$374,964.11
May 2055	$2,441.33	$139.78	$22,594.56	$528,564.84	$377,405.44
June 2055	$2,454.96	$126.15	$20,139.60	$528,690.99	$379,860.40
July 2055	$2,468.67	$112.45	$17,670.94	$528,803.44	$382,329.06
August 2055	$2,482.45	$98.66	$15,188.49	$528,902.10	$384,811.51
September 2055	$2,496.31	$84.80	$12,692.18	$528,986.91	$387,307.82
October 2055	$2,510.25	$70.86	$10,181.93	$529,057.77	$389,818.07
November 2055	$2,524.26	$56.85	$7,657.67	$529,114.62	$392,342.33
December 2055	$2,538.36	$42.76	$5,119.31	$529,157.37	$394,880.69
January 2056	$2,552.53	$28.58	$2,566.78	$529,185.96	$397,433.22
February 2056	$2,566.78	$14.33	$0.00	$529,200.29	$400,000

This example illustrates how the amount of your payment that applies toward the principal increases the longer you pay off your mortgage loan, while the amount applied to interest decreases.

What you should know about amortization before borrowing

When it comes to a mortgage, most buyers choose a 30-year loan without much thought. But there are cases when the default loan term and amortization schedule might not be the best fit, especially if you’re making a low down payment and don’t plan to stay in the home for long.

“Say, for example, you purchased a starter home intending to live in it for only five years before upgrading to a larger house,” says Nishank Khanna, co-founder and CEO of Demand Roll in New York City. “You expect to make a profit when you sell, but you find out that you owe more than the value of the house. That’s because of your chosen amortization schedule and a slight depreciation [in the] home’s value. In this scenario, you opted for a 30-year mortgage over a 15-year loan, and most of your payments went toward interest rather than the principal balance.”

On the other hand, borrowers sometimes overthink the amount of interest they’ll pay over the life of the loan, says Bankrate housing analyst Jeff Ostrowski.

Those numbers — tens of thousands, even hundreds of thousands in interest — look daunting. But for most Americans, paying mortgage interest is a financially sound way to achieve homeownership. — Jeff Ostrowski, Bankrate housing analyst

Understanding your amortization schedule can also help you choose a strategy for prepaying your mortgage. If you can afford to make extra payments on your mortgage, you’ll lower your principal balance more quickly and reduce the amount of interest you pay on your loan.

Money tip: Let’s say you have a $200,000, 30-year loan with a 6.5% interest rate. By making an extra $100 payment each month, you would save $55,944 in interest over the life of your mortgage. You’d also pay off your loan five years and seven months earlier than if you didn’t make the extra payment.

Frequently asked questions

Refinancing can be a great way to secure a lower interest rate or more favorable loan terms. But when you refinance, you’re replacing your current mortgage with a new one. Doing so can reset the timeline for fully repaying your mortgage, as well as the loan amortization schedule. If you choose to start over with a 30-year loan, you’ll find that a larger portion of each monthly mortgage payment goes toward interest once again.
When you first get a mortgage, a larger percentage of each monthly payment goes toward interest rather than toward repaying the principal. As a result, amortization slows the process of building equity in your home.
Negative amortization happens when the payments you’re making don’t cover the interest on the loan, and your balance grows instead of shrinks. This might be the case if your lender allows you to make interest-only payments.

Over time, if the amount you owe ends up exceeding the value of your home, you’ll be “underwater” on the property, making it more difficult to sell and use those proceeds to repay the mortgage.