Amortization Schedule


DEFINITION of 'Amortization Schedule'

A complete table of periodic blended loan payments, showing the amount of principal and the amount of interest that comprise each payment so that the loan will be paid off at the end of its term. While each periodic payment is the same, early in the schedule, the majority of each periodic payment is interest. The percentage of each payment that goes toward interest diminishes a bit with each payment, and the percentage that goes toward principal increases. Later in the schedule, the majority of each periodic payment is put toward the principal. The last line of the schedule shows the borrower’s total interest and principal payments for the entire loan term.

BREAKING DOWN 'Amortization Schedule'

For example, the first few lines of an amortization schedule for a $250,000, 30-year fixed-rate mortgage with a 4.5% interest rate would look like this:


Total Payment



Total Interest

Loan Balance

Month 1






Month 2






Month 3






Source: Bankrate Mortgage Calculator

An amortization schedule is used for loans whose payoff date is known at the time the loan is taken out, such as a mortgage or car loan. If you know the term of a loan (30 years) and the total periodic payment ($1,266.71), an easy way to calculate an amortization schedule without using an online amortization schedule calculator is to do the following:

  • Starting in month one, multiply the loan balance ($250,000) by the periodic interest rate (e.g., one-twelfth of 4.5% for a monthly mortgage payment) ($250,000 x 0.00375 = $937.50). The result will be the interest amount of the first month's payment. Subtract that amount from the periodic payment ($1,266.71 - $937.50) to get the principal amount ($329.21).
  • To calculate the next month’s interest and principal payments, subtract the principal payment made in month one ($329.21) from the loan balance ($250,000) to get the new loan balance ($249,670.79), and then repeat the steps above.
  1. Amortization

    1. The paying off of debt in regular installments over a period ...
  2. Standing Mortgage

    In contrast with a normal mortgage, standing mortgages are a ...
  3. Fully Amortizing Payment

    A periodic loan payment, part of which is principal and part ...
  4. Negative Amortization

    An increase in the principal balance of a loan caused by making ...
  5. Balloon Maturity

    1. A repayment schedule for a bond issue where a large number ...
  6. Alternative Mortgage Instrument

    A broad category of mortgages that vary from fixed-rate, fully ...
Related Articles
  1. Credit & Loans

    How Mortgage Refinancing Affects Your Net Worth

    Find out how to determine whether refinancing will put you ahead or even more behind.
  2. Options & Futures

    Make A Risk-Based Mortgage Decision

    Find out how to choose which mortgage style is right for you.
  3. Credit & Loans

    Understanding The Mortgage Payment Structure

    We explain the calculation and payment process as well as the amortization schedule of home loans.
  4. Home & Auto

    Option ARMs: American Dream Or Mortgage Nightmare?

    Option adjustable rate mortgages could make or break your home-buying experience.
  5. Options & Futures

    Be Mortgage-Free Faster

    Getting rid of this debt faster has bigger benefits than you might think.
  6. Savings

    How Parents Can Help Adult Children Buy a Home

    Owning a home isn't easy thanks to stringent lending standards. Thankfully, there's ways parents can help their kids buy a home.
  7. Credit & Loans

    HARP Loan Program: Help for Underwater Mortgages

    If you are underwater on your mortgage, this program may be just what you need to help build up equity in your home.
  8. Insurance

    6 Reasons To Avoid Private Mortgage Insurance

    This costly coverage protects your mortgage lender - not you.
  9. Credit & Loans

    Pre-Qualified Vs. Pre-Approved - What's The Difference?

    These terms may sound the same, but they mean very different things for homebuyers.
  10. Home & Auto

    9 Things You Need To Know About Homeowners' Associations

    Restrictive rules and high fees are just some of the things to watch out for before joining an HOA.
  1. What does amortization mean in the context of a pension plan?

    There are two primary needs for amortization within the context of a company's pension plan. The first instances might include ... Read Full Answer >>
  2. Do FHA loans require escrow accounts?

    Federal Housing Administration (FHA) loans require escrow accounts for property taxes, homeowners insurance and mortgage ... Read Full Answer >>
  3. Do FHA loans have prepayment penalties?

    Unlike subprime mortgages issued by some conventional commercial lenders, Federal Housing Administration (FHA) loans do not ... Read Full Answer >>
  4. Can FHA loans be refinanced?

    Federal Housing Administration (FHA) loans can be refinanced in several ways. According to the U.S. Department of Housing ... Read Full Answer >>
  5. Can FHA loans be used for investment property?

    Federal Housing Administration (FHA) loans were created to promote homeownership. These loans have lower down payment requirements ... Read Full Answer >>
  6. Do FHA loans have private mortgage insurance (PMI)?

    he When you make a down payment from 3 to 20% of the value of your home and take out a Federal Housing Administration (FHA) ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Bar Chart

    A style of chart used by some technical analysts, on which, as illustrated below, the top of the vertical line indicates ...
  2. Bullish Engulfing Pattern

    A chart pattern that forms when a small black candlestick is followed by a large white candlestick that completely eclipses ...
  3. Cyber Monday

    An expression used in online retailing to describe the Monday following U.S. Thanksgiving weekend. Cyber Monday is generally ...
  4. Take A Bath

    A slang term referring to the situation of an investor who has experienced a large loss from an investment or speculative ...
  5. Black Friday

    1. A day of stock market catastrophe. Originally, September 24, 1869, was deemed Black Friday. The crash was sparked by gold ...
Trading Center