How amortization works
On a fixed-rate loan your payment never changes, which makes it easy to assume the loan shrinks steadily. It does not. What changes every month is the split inside that unchanging payment, and for a long loan the split is lopsided for a very long time.
Each month the lender does the same three things:
- Charge interest on what you currently owe: balance × (annual rate ÷ 12).
- Apply your payment to that interest first.
- Put whatever is left toward the principal.
That ordering is the whole story. Because interest is charged on the outstanding balance, a large balance produces a large interest charge, which leaves little of the payment for principal, which keeps the balance large. The loop only unwinds slowly — and then, once the balance really starts falling, it unwinds fast.
The crossover point
The moment worth knowing about is the first payment where more money goes to principal than to interest. On a $300,000 loan at 6% over 30 years, that is payment 223 — eighteen and a half years in. For the entire first half of a typical mortgage, and then some, the lender takes the larger share of every payment you make.
Nothing dramatises an interest rate quite like watching that date move:
- At 3%, the crossover arrives at payment 84 — around year seven.
- At 6%, it arrives at payment 223 — around year nineteen.
- At 8%, it slips to payment 257 — past year twenty-one.
Term matters just as much. The same $300,000 at 6% over 15 years crosses over at payment 43, in year four, and costs $155,683 in total interest instead of $347,515. Halving the term does not halve the interest — it cuts it by more than half, because the balance spends far less time being large.
What the total interest actually adds up to
A useful way to read a schedule is as a price. On the $300,000 example, the total interest is $347,515 — $1.16 of interest for every $1.00 borrowed. The house costs what it costs; the mortgage costs slightly more than the house again.
That ratio is remarkably sensitive to rate and term. At 3% over 30 years it falls to $0.52 per dollar. At 8% it rises to $1.64. A car loan at 7% over six years costs just $0.23 per dollar borrowed, because there is so little time for interest to accumulate. When you are comparing loans, the ratio is often a more honest headline than the monthly payment, which can always be made smaller by stretching the term.
How to read your schedule
- Check the balance at a date that matters. If you expect to move or refinance in year seven, the schedule tells you what you will still owe — and therefore how much equity you will actually have.
- Compare it with your statement. The numbers should line up within a few dollars. A larger gap usually means a different assumption, not an error — see the FAQ.
- Watch what an extra payment does. Add one above and the schedule rebuilds. Because the extra goes entirely to principal, it removes interest from every future month at once.
- Export it. The CSV contains every payment, so you can model your own scenarios in a spreadsheet.
What this calculator assumes
A fixed rate for the whole term, equal monthly payments, and interest accrued monthly on the outstanding balance. It does not model adjustable rates after their initial period, daily interest accrual, fees financed into the balance, or escrow for taxes and insurance — escrow is part of your bill but not part of your loan. For a payment that includes taxes, insurance and PMI, use the mortgage calculator; to see what overpaying is worth, use the mortgage payoff calculator.