Fixed-rate Amortization Schedule

The following table is a snapshot of an amortization table that uses the above formula for its calculations.

It shows the first year of amortization schedule for a thirty-year fixed rate loan of $150,000 at an interest rate of 6% and a monthly principal and interest payment of $899.33. The table illustrates, month by month, how much of the payment goes to principal vs. interest, and how much loan balance is left.

As you can see from this illustration:

• The interest rate due with each payment depends on the loan balance for that payment
• The loan balance decreases with each payment
• As the loan balance decreases, so does the portion of each payment that goes to interest

With 30-year fixed mortgages, it should be noted that:

• More than 84% of the monthly payment is applied to interest during the first ten years of the loan, and...
• It is not until the 22nd year that 50% of the principal balance is paid off.

If we look at a snapshot of year 22 of the same loan, one sees the difference in how much of the monthly payment goes to principal vs. interest, and how much more quickly the loan principal balance goes down.

At the beginning of year 22, the loan's principal balance is a little less than half of the original amount, and a great deal more of the monthly payment goes to principal than to interest compared to payments near the start of the loan.