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What Is Mortgage Amortization?

Understand How Lenders Determine Your Monthly Payments

Amortization is the process lenders use to apply your monthly mortgage payments to your principal balance and interest due. Your amortization schedule helps ensure that you have fully paid off your mortgage at the end of the loan’s term.

What Is an Amortized Mortgage?

An amortized mortgage means the monthly payments are paid down predictably over time, with the loan balance decreasing gradually in the beginning.

What Is a Mortgage Amortization Schedule and How Does It Work?

A mortgage amortization schedule displays the amount of each payment that goes toward principal and interest. It will also show you how your total balance will change after each successful payment. A mortgage amortization schedule typically requires:

  • Total loan amount
  • Loan term
  • Interest rate
  • Minimum payment
  • Frequency of minimum payment
  • Principal and interest divide
  • Total balance after payment

Here’s an example of a mortgage amortization schedule for a $300,000 fixed-rate mortgage with a 30-year loan term and a 3% interest rate that is repaid monthly. A full amortization schedule for this loan would show 360 monthly payments. This example shows just the first six months:

Month Minimum payment Interest Principal Total balance after payment Cumulative interest
1 $1,265 $750 $515 $299,485 $750
2 $1,265 $749 $516 $298,969 $1,499
3 $1,265 $747 $517 $298,452 $2,246
4 $1,265 $746 $519 $297,933 $2,992
5 $1,265 $745 $520 $297,413 $3,737
6 $1,265 $744 $521 $296,892 $4,481


In this example, you pay a little less in interest each month because you are paying down the principal balance. As your interest costs decrease, more of your payment goes toward paying down your principal balance. The following month’s interest payment is based on the updated total balance.

What Is a Rapidly Amortizing Mortgage?

A rapidly amortizing mortgage is also known as a growing equity mortgage. A rapidly amortizing mortgage starts with monthly payments that increase over the loan term. The additional money in this payment is put towards the principal balance with the goal of paying off your mortgage sooner and potentially helping your pay less interest over the life of the loan.

What Is a Negative Amortization Mortgage?

If you make mortgage payments that are lower than the interest due that month, your total mortgage balance will increase. This is considered negative amortization. When the interest is not fully paid, it is added to the principal balance. The following month, the interest payment due will be based on the new and higher principal balance. Over time, borrowers with a negative amortization mortgage may end up paying more for interest over the life of the loan.

What Types of Mortgages Are Associated With Negative Amortization?

Loans that do not fully amortize or negatively amortize often require a final, large payment at the end of the term. These are sometimes called balloon payment mortgages and can be risky if you cannot afford the final lump sum payment.

Can I Re-Amortize My Mortgage?

Depending on your loan type and lender, you may be able to re-amortize your mortgage. This is also called a mortgage recast. To re-amortize your mortgage, you would need to make a large lump-sum payment that would lower the balance influencing your interest rate. Re-amortizing your mortgage with a lump-sum payment is one way to pay less interest over the life of your loan.

Speak with a Loan Advisor

Do you have questions about what your mortgage payment schedule will look like? Call one of our Loan Advisors at 877-220-5533 or Get Started online to learn more about your options.

Last reviewed and updated June 2023 by Freedom Mortgage Corporation.

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