Amortization

Amortization is how your mortgage payments are structured to gradually pay off your loan over time. Each payment includes both principal (loan balance) and interest.

How Amortization Works:

• Early payments are mostly interest
• Later payments are mostly principal
• Total payment stays the same (fixed-rate)
• Balance gradually decreases to zero

  Example (30-Year, $300,000 loan at 6%):

• Monthly payment: $1,799
• First payment: $1,500 interest, $299 principal
• After 15 years: $750 interest, $1,049 principal
• Final payment: Almost all principal

  Amortization Schedule:

A table showing each payment broken down by:

• Payment number
• Payment amount
• Principal portion
• Interest portion
• Remaining balance

  Why Early Payments Are Mostly Interest:

Interest is calculated on the remaining balance. When the balance is highest (early in the loan), more of your payment goes to interest.

Building Equity Faster:

• Make extra principal payments
• Choose a shorter loan term
• Make biweekly payments (26 half-payments = 13 full payments)
• Round up your monthly payment

  Amortization and Taxes:

Mortgage interest is often tax-deductible. Since you pay more interest early in the loan, the tax benefit is greater in early years.