How amortization works
Each scheduled payment is the same size, but its composition changes every month:
- Interest = current balance × (annual rate ÷ 12)
- Principal = payment − interest
- The new balance = old balance − principal
Because the balance falls a little each month, next month’s interest is a little smaller and next month’s principal a little larger. Repeat 360 times for a 30-year loan and you get the amortization curve.
Reading your schedule
The table below groups payments by year and shows principal paid, interest paid, and the remaining balance at year-end. A few things to look for:
- The crossover point — the year when principal paid finally exceeds interest paid. On a 30-year loan near 6.5%, that’s usually around year 18–19.
- Total interest as a share of the loan — at 6.5% over 30 years you pay roughly $1.28 in interest for every $1 borrowed.
- How an extra monthly amount pulls the payoff date forward and flattens the interest column.
Uses beyond mortgages
The same math applies to auto loans, student loans, and personal loans. Drop in the balance, rate, and term to see the true interest cost and how additional payments change it. For credit cards, which have no fixed term, use the credit-card payoff calculator instead.