What is an amortization schedule?

An amortization schedule is a table showing every payment over the life of a loan. Each row lists the payment number, the amount going to interest, the amount going to principal, and the remaining balance. On a 30-year mortgage at 6.5% that is 360 rows — and the table makes plain just how long you mostly pay the lender before you make serious progress on the debt.

Why do early payments go mostly to interest?

Because interest is charged on the outstanding balance, and the balance is largest at the start. On a $400,000 loan at 6.5%, month-one interest is $400,000 × (6.5% ÷ 12) = $2,167. The fixed payment is about $2,528, so only $361 trims the debt. As the balance falls, each month's interest charge is smaller and more of the fixed payment becomes principal — that is the crossover point, which happens around year 19 on a 30-year loan.

How does an extra payment affect amortization?

Every extra dollar goes straight to principal and eliminates all the future interest that dollar would have carried. Adding $200/month to a $400,000, 6.5%, 30-year mortgage cuts roughly 5 years off the term and saves about $90,000 in interest. Lump-sum extra payments made early have the greatest impact because each one removes a compounding interest tail.

What is negative amortization?

Negative amortization occurs when a payment is too small to cover even the interest due. The shortfall is added to the principal, so the balance grows instead of shrinking. It can happen with some adjustable-rate or interest-only loan structures. Standard fixed-rate mortgages are fully amortizing — every payment reduces principal and the balance reaches exactly zero at the final payment.

How is amortization different in Canada vs the US?

In the US "amortization" typically means the loan term (e.g. a 30-year mortgage). In Canada the word has a specific technical meaning: the total payoff horizon, which is separate from the term (how long the rate is locked). Canadian amortizations are usually 25 years (or up to 30 for first-time buyers or new builds with default insurance). The payment formula also differs — Canadian fixed rates compound semi-annually under the Interest Act , not monthly, which produces a slightly lower effective rate and lower payment than the US formula.

Amortization

Amortization is the schedule that pays a mortgage down to zero. Early payments go mostly to interest; later payments mostly to principal. Learn how it works, how to read a schedule, and how extra payments shorten your loan.

Updated August 2026

Definition

Amortization is the process of paying off a debt through regular, equal payments spread over a fixed period. For a mortgage, each payment covers the interest owed on the current balance and chips away at the principal. Because the balance is highest at the start, early payments are mostly interest; as the balance falls, the principal share grows — until the final payment brings the balance to exactly zero.

How the interest/principal split changes over 30 years

Each bar below represents one year of a $400,000 mortgage at 6.5%. Orange is interest; blue is principal. Watch the crossover — principal overtakes interest around year 19.

Real numbers: $400,000 at 6.5% for 30 years

Monthly P&I payment $2,528

Month 1 — goes to interest $2,167 86% of payment

Month 1 — goes to principal $361 14% of payment

Month 180 (year 15) — interest $1,594 Balance: ~$293,000

Total interest paid (30 yr) $510,177 More than the loan itself

Crossover point ~Year 19 Principal > interest per payment

Sample schedule rows

Payment #	Interest	Principal	Balance
1	$2,167	$361	$399,639
12	$2,147	$381	$395,591
60 (yr 5)	$2,067	$461	$378,966
120 (yr 10)	$1,940	$588	$355,291
180 (yr 15)	$1,767	$761	$323,476
228 (yr 19)	$1,261	$1,267	$231,827
300 (yr 25)	$858	$1,670	$156,804
360 (yr 30)	$14	$2,514	$0

How amortization affects your monthly payment

Longer term = lower payment, more interest

Stretching from 15 to 30 years on a $400,000 loan at 6.5% drops the monthly P&I from $3,488 to $2,528 — but you pay $510,177 in interest instead of $227,715. The longer amortization lowers cash-flow strain at the cost of $282,462 in extra interest.

Extra payments attack principal directly

Every $100 in extra monthly principal on the example loan above saves roughly $18,000 in interest and cuts 2–3 years off the term. You are essentially buying future principal payments at today's interest rate.

Canadian semi-annual compounding

Canada's Interest Act requires semi-annual compounding on fixed-rate mortgages. At 5% over 25 years on $500,000, the correct Canadian payment is $2,908 versus $2,923 using the US monthly-compounding formula — a small but real difference over 300 payments.

Frequently asked questions

What is an amortization schedule?: An amortization schedule is a table showing every payment over the life of a loan. Each row lists the payment number, the amount going to interest, the amount going to principal, and the remaining balance. On a 30-year mortgage at 6.5% that is 360 rows — and the table makes plain just how long you mostly pay the lender before you make serious progress on the debt.
Why do early payments go mostly to interest?: Because interest is charged on the outstanding balance, and the balance is largest at the start. On a $400,000 loan at 6.5%, month-one interest is $400,000 × (6.5% ÷ 12) = $2,167. The fixed payment is about $2,528, so only $361 trims the debt. As the balance falls, each month's interest charge is smaller and more of the fixed payment becomes principal — that is the crossover point, which happens around year 19 on a 30-year loan.
How does an extra payment affect amortization?: Every extra dollar goes straight to principal and eliminates all the future interest that dollar would have carried. Adding $200/month to a $400,000, 6.5%, 30-year mortgage cuts roughly 5 years off the term and saves about $90,000 in interest. Lump-sum extra payments made early have the greatest impact because each one removes a compounding interest tail.
What is negative amortization?: Negative amortization occurs when a payment is too small to cover even the interest due. The shortfall is added to the principal, so the balance grows instead of shrinking. It can happen with some adjustable-rate or interest-only loan structures. Standard fixed-rate mortgages are fully amortizing — every payment reduces principal and the balance reaches exactly zero at the final payment.
How is amortization different in Canada vs the US?: In the US "amortization" typically means the loan term (e.g. a 30-year mortgage). In Canada the word has a specific technical meaning: the total payoff horizon, which is separate from the term (how long the rate is locked). Canadian amortizations are usually 25 years (or up to 30 for first-time buyers or new builds with default insurance). The payment formula also differs — Canadian fixed rates compound semi-annually under the Interest Act, not monthly, which produces a slightly lower effective rate and lower payment than the US formula.