How to Read an Amortization Schedule

An amortization schedule is the loan written out month by month. It looks like a wall of numbers, and it is the most direct answer to the question “what is this loan actually costing me” that exists — because it shows every dollar, in order, with the balance after each payment.

Here is how to read one.

The columns

A typical schedule has five or six columns.

Payment number. The month, counting from the first payment.

Payment amount. The total paid that month. It is the same figure for almost every month, which is the point of amortization: the payment is level, and only its composition changes.

Interest. The interest charged that month. It equals the balance at the start of the month multiplied by the monthly rate. The column starts high and declines.

Principal. The part of the payment that reduces the balance. It is the payment minus the interest, and it starts small and grows. Interest plus principal equals the payment, and it is worth checking that on any schedule you are handed.

Extra. Any amount paid above the scheduled payment, applied to principal. It is zero on most schedules and appears on the one you build in the calculator when you use the extra payment field.

Balance. What is still owed after that payment. This is the column that tells the story.

The three shapes to look for

The interest column falls. Not because the rate changes, but because the balance it is charged on shrinks.

The principal column rises. Not because more of the payment is allocated to it by any decision, but because less of the payment is eaten by interest.

The balance column is the interesting one. It falls slowly at first, then more quickly, then flattens as it approaches zero. The steep part is near the end, which is the opposite of what most people expect, and it is the reason a thirty-year loan is repaid much faster than it feels.

The cumulative interest column

If a schedule has a column that accumulates interest rather than showing it per month, it is worth finding. That column answers the question the monthly one cannot: how much of the cost have I already paid?

On a typical thirty-year loan, roughly a quarter of the total interest is charged in the first five years, and the majority of it is charged in the first decade. Seeing that in a single column is a different experience from adding up monthly interest figures by hand.

Why the last row is different

The payment is a fixed number of cents, and a loan does not divide evenly into whole cents over a fixed number of months. A small balance is left outstanding at the end.

The final payment is adjusted to clear it. This is not an anomaly and it is not an error; it is what happens whenever a payment is rounded. The calculator on this site adjusts the final payment for the same reason, and the last row of its schedule is the one to look at if you want to confirm that the loan closes at exactly zero.

What is not in a schedule

A pure amortization schedule covers the loan and nothing else.

Property tax and insurance are not amortized. They are annual costs divided into monthly instalments, and they appear on the payment statement rather than on the schedule. A schedule that includes them is showing escrow, not amortization.

Fees are not in it. Closing costs, points and mortgage insurance are separate from the loan’s arithmetic.

Inflation is not in it. A schedule is a set of nominal figures, which is correct for a fixed-rate loan and does not describe what those figures buy.

Using a schedule to test a change

The most practical use of a schedule is comparison. Change one input and read what happens:

• Add $200 a month of extra principal and watch the number of rows fall.
• Change the term from 30 years to 15 and watch the interest column start much lower.
• Change the rate and watch the interest column start much higher and the whole schedule stretch.

The mortgage payment calculator produces the year-by-year version of this table, and the amortization guide explains the mechanism behind each column.