An amortization schedule is the repayment plan behind every fixed-rate loan. The monthly payment never changes, but its makeup does: each month interest is charged on the remaining balance, and whatever's left of the payment chips away at the principal. Because the balance is highest at the start, early payments are mostly interest and later ones mostly principal. The schedule lays this out month by month until the balance reaches zero.
Reviewed: June 20, 2026 · Author: Naveen P N, Founder — AI Calculator · Verified against: the standard amortizing-loan formula, recomputed in code. Not financial advice.
The amortization formula
P is the loan amount, r is the monthly rate (annual rate ÷ 12), and n is the number of payments (years × 12). The payment formula sizes M so the balance lands on exactly zero at payment n. From there the schedule is mechanical: charge interest on the current balance, subtract it from the payment to get the principal portion, reduce the balance, repeat. The total interest is simply M × n − P.
Worked example — $320,000 at 6.5% for 30 years
Scenario: loan $320,000, rate 6.5% (r = 0.0054167), term 30 years (n = 360).
The payment is $2,022.62 and you'll pay $408,142 of interest over 30 years — more than the original loan. Month one's interest alone is about $1,733, so only ~$290 reduces principal; by the final year almost the whole payment is principal. Shortening the term flips the maths: at 15 years the payment rises to $2,787.54 but total interest drops to $181,758 — less than half. That trade-off, lower payment versus less interest, is the central choice in any loan.
Frequently Asked Questions
The plan that pays a fixed-rate loan to zero. Fixed payment; interest share falls, principal share rises.
M = P·r ÷ (1 − (1+r)⁻ⁿ). $320,000 at 6.5%/30yr = $2,022.62/month.
Interest is on the balance, biggest at the start. Month one: ~$1,733 interest, ~$290 principal.
Yes — 15 yr is $2,787.54/mo but $181,758 interest vs $408,142 over 30 yr.
Taxes, insurance, PMI, HOA, fees. Real mortgage payment (PITI) is higher.