Our goal here at Credible Operations, Inc. NMLS 1681276, hereinafter referred to as “Credible”, is to provide you with the tools and confidence you need to improve your finances. While we promote products from our creditor partners that compensate us for our services, all opinions are our own.
- Advertisement -

- Advertisement -

- Advertisement -

When you take out a fixed rate mortgage, you know that your monthly payments will remain the same for as long as you have the loan. But how first home buyerwhat you may not know is that what these payments go to changes over time.

At the start of your home loan, most of your monthly payment goes towards paying interest. Eventually, you start paying more and more of the principal.

This is called mortgage amortization, and it’s important to know if your goal is to get out of debt. Here’s how mortgage amortization works and how you can use this knowledge to your advantage.

Reliable helps you compare mortgage rates from multiple creditors.

What is mortgage amortization?

Mortgage amortization is the process of paying off a mortgage loan. When you first take out a mortgage, you are given a set monthly payment. Part of this payment goes to pay interest, or the money you pay mortgage lender in exchange for giving you a loan. The other part of the payment goes to main, or the amount you actually borrowed. In most cases, a portion of your monthly payment also goes toward things like property tax and insurance.

At the beginning of the loan term, most of your payment will go to interest on the loan. This is because the loan balance is still high, so you owe a lot of interest. Only a small amount goes towards the principal.

But this gradually shifts the longer you have credit. As you pay the principal, the amount of interest you have to pay also decreases. At the end of the term, you will mostly pay the principal amount, and only a small amount will go to interest.

What is a mortgage loan repayment schedule?

A mortgage amortization schedule is a chart or table showing how your payment changes over time. For each month of the loan term, you will see a record showing how much of your mortgage payment goes towards principal and how much goes towards interest.

For a $200,000 loan repaid over 30 years at a 6% interest rate, the mortgage loan repayment schedule can follow the following type of scheme:

Month 1 (first month)

  • Payment: $1199.10.
  • Basic: $199.10
  • Interest: $1,000
  • Ending balance: $199,801

Month 3 (third month)

  • Payment: $1199.10.
  • Basic: $201.10
  • Interest: $998
  • Ending balance: $199,400.

Month 360 (last month)

  • Payment: $1199.10.
  • Principal: $1,193.13.
  • Interest: $5.97
  • End balance: $0

When you close your mortgage, you will most likely get a mortgage repayment schedule to review. This is to make sure you understand how mortgage payments work.


How to calculate mortgage depreciation?

Mortgage loan amortization is calculated using a fairly complex formula that takes into account the balance of the loan, the length of the loan term, and your interest rate.

Luckily, you don’t have to do the math yourself. There are many mortgage amortization calculators available online that you can use to work out the breakdown of your payments. You can try this is from freddie mac to get you started.

With Credible you can compare pricesfind out how much housing you can afford and create a streamlined pre-approval letter in minutes.

What are the advantages and disadvantages of depreciation?

Mortgage loans have both pros and cons.


  • Your loan is fully repaid in equal installments. With a fully amortized fixed rate mortgage, you pay off your mortgage in full at maturity, making the same exact payment each month.
  • You know in advance all the details of your payments. Mortgage amortization is simple math. Using the amortization calculator, you can understand exactly how your payment will be distributed. before closing the loan.
  • Your payments do not change. Traditional mortgage amortization allows you to keep the same monthly payment, making it easier to budget.


  • You are slowly building up capital. At the beginning of your loan, you pay very little principal. This means that you are only slowly building up capital in your home.
  • This may be difficult to understand. While depreciation is math, it’s hard math. Performing calculations on your own is out of reach for most people.
  • You pay high interest. Over the course of a 30-year mortgage, you can pay hundreds of thousands of dollars in interest. Your interest payments at the beginning of a mortgage are especially high due to the large balance.


Should I pay off my mortgage faster?

If you can afford to pay off your mortgage faster, this is often a great idea. The faster you can pay off the loan, the less interest you end up paying. Consider a few of these strategies to save money and get out of debt faster:

  • Make additional payments. When you make additional payments on a loan, the extra amount is usually applied directly to the main balance. This reduces the amount you will pay in general interest, often by a significant amount. You can save tens of thousands of dollars in mortgage payments by making even small incremental payments each month or year.
  • Make bi-weekly payments. Instead of making a monthly payment, you may want to consider paying off your mortgage every two weeks. This may better match your salary, and you’ll make the equivalent of 13 monthly payments over the course of a year. This extra month can go towards your main month.
  • Refinance for a shorter period. The shorter your mortgage, the less interest you will pay in the long run, although your monthly payments will be higher. If your budget allows, consider refinancing your 30-year mortgage into a 15- or 10-year loan to reduce the amount you end up paying. You can also qualify for a lower interest rate.

When you’re ready to apply for a mortgage, you can use Credible to compare rates from multiple lenders.