Amortization schedule
An amortization schedule is a table
detailing each periodic payment on a loan
(typically a mortgage),
as generated by an amortization calculator. Amortization schedules
are calculated so that each periodic payment
for the entirety of the loan is equal, making
the repayment process somewhat simpler under
amortization
than with other models.
While every payment is applied towards both
the interest and the
principal of the loan, the exact amount applied
to principal each time (with the remainder going
to interest) varies. An amortization schedule
reveals the specific dollar amount put towards
interest, as well as the specific put towards
principal, with each payment. Initially, a large
portion of each payment is devoted to interest.
As the loan matures, larger portions go towards
paying down the principal.
Amortization
schedules run in chronological order. The first payment is assumed
to take place one full payment period after
the loan was taken out, not on the first day
of the loan.
The last payment completely pays off the remainder
of the loan. Often, the last
payment will be a slightly different amount
than all earlier payments.
In addition to breaking down each payment into
interest and principal portions, an amortization
schedule also reveals interest-paid-to-date,
principal-paid-to-date, and the remaining principal
balance on each payment date.
Example amortization schedule
(To run your own numbers, try an amortization calculator.)
This amortization schedule is based on the
following assumptions:
- Principal = $100,000
- Annual Interest rate = 8%
- Number of payments = 360 (30 years x 12
months x 1 payment per month)
|
# of payments
|
Principal
|
Interest
|
Principal to-date
|
Interest to-date
|
Principal balance
|
|
1
|
67.09
|
666.67
|
67.09
|
666.67
|
99932.91
|
|
2
|
67.54
|
666.22
|
134.63
|
1332.89
|
99865.37
|
|
3
|
67.99
|
665.77
|
202.62
|
1998.66
|
99797.38
|
|
4
|
68.44
|
665.32
|
271.06
|
2663.98
|
99728.94
|
|
5...
|
68.90
|
664.86
|
339.96
|
3328.84
|
99660.04
|
|
...359
|
724.03
|
9.73
|
99264.28
|
164155.56
|
735.72
|
|
360
|
735.72
|
4.90
|
100000.00
|
164160.46
|
0.00
|
