Is it true that by year 15, the split starts shifting toward principal?

By year 15, the split starts shifting toward principal

Is it true that amortization tables show exactly where every dollar goes?

Amortization tables show exactly where every dollar goes

How do extra payments applied early affect total interest most significantly?

Extra payments applied early affect total interest most significantly

30-year standard

How amortization works

Why most of your first mortgage payment goes to interest — and how this changes over time.

Quick answer

Amortization splits each fixed monthly payment between interest (calculated on the remaining balance) and principal (the rest). Early in the loan, most of the payment is interest because the balance is large. Late in the loan, most goes to principal. This front-loaded interest pattern is why early extra payments save dramatically more than late ones.

Level

Try calculator

Key takeaways

04 · ideas

Month 1 of a $300k loan at 7%: $1,750 interest, $246 principal
By year 15, the split starts shifting toward principal
Amortization tables show exactly where every dollar goes
Extra payments applied early affect total interest most significantly

Amortization is the process of paying off a loan through regular scheduled payments over time. Each payment covers two things: the interest owed for that period, and a portion of the original principal.

How the split is calculated:

Interest portion = remaining balance x monthly rate
Principal portion = fixed payment minus interest portion
New balance = old balance minus principal paid

With a $300,000 mortgage at 7% (monthly rate: 0.583%), month 1 interest is $1,750. If the fixed monthly payment is $1,996, then $246 goes to principal. The balance drops to $299,754.

Why early payments are mostly interest:
Because the balance is highest at the start, the interest charge is also highest. As the balance slowly falls, more of each payment covers principal. This process accelerates over time.