How to Read an Amortization Schedule
An amortization schedule shows where every payment goes and how the balance falls over time. Here's how to read one, why the principal/interest split flips mid-loan, and how extra payments change the table.
An amortization schedule is the full payoff table for a loan — one row per payment, showing exactly where your money goes and how the balance falls. If the mortgage payment formula tells you how much you pay each month, the schedule tells you what that payment is actually doing.
The four columns
Every amortization schedule has the same shape:
- Payment — the fixed monthly amount (constant on a fixed-rate loan)
- Interest — that month's interest, charged on the current balance
- Principal — the payment minus the interest; what actually reduces the loan
- Balance — what you still owe after the payment
Each row's interest is computed the same way:
Interest this month = Current balance × (annual rate ÷ 12)
Principal this month = Payment − Interest this month
New balance = Current balance − Principal this month
The split flips over the life of the loan
The payment is fixed, but its makeup isn't. Because interest is charged on the balance — highest at the start — early payments are mostly interest and late payments are mostly principal. On a $240,000 loan at 7% over 30 years:
Payment 1 → $1,400 interest / $197 principal
Payment 180 (yr 15) → roughly half and half
Payment 360 → almost entirely principal
This is why building equity feels painfully slow in a mortgage's early years — and why selling or refinancing early means you've paid mostly interest with little principal to show for it.
What extra payments do to the table
Any amount you pay above the scheduled payment goes entirely to principal. That immediately lowers the balance, which lowers every future interest charge, which means more of each remaining payment attacks principal — a compounding effect that pulls the payoff date forward and cuts total interest.
Extra $200/mo on the loan above
→ paid off ~7 years early
→ tens of thousands less in total interest
A schedule makes this visible in a way a single monthly number never can: you can watch the balance column fall faster and the interest column shrink with every extra dollar.
Why investors read the schedule
- Equity tracking — the balance column tells you how much of the property you own at any point, which drives refinance and sale decisions.
- Interest for taxes — the interest column is the deductible portion on an investment property.
- Payoff planning — testing extra-payment scenarios shows the real trade-off between paying down debt and deploying cash elsewhere.
Sources
Informational only, not professional advice. Real estate outcomes depend on your market, financing, and tax situation — verify every figure against your own numbers and a qualified professional before acting on a deal.