Mortgages Analyzed
Amortization Schedule

What is an Amortization Schedule?

Amortization Schedule

Amortization Schedule is a tabular presentation of the periodic payment amount, principal amount, interest, and the unpaid principal balance for each payment period. The purpose is to show the application of monthly payment towards principal and interest during the life of the loan. The schedule is built in such a manner that the loan amount is fully paid off by the end of the loan term.

Loan originators may provide you with an amortization schedule as part of their sales process.


Example of an Amortization Schedule

The Amortization Schedule below is calculated for a $10,000 loan with 6% interest rate for a 1 year term.

Loan Parameters

Monthly Payment
Total Interest Paid
12 Months
Total Payments

Amortization Schedule

1 $10,000.00 $50.00 $10,500.00 $860.66 $810.66 $9,189.34
2 $9,189.34 $45.95 $9,235.28 $860.66 $814.72 $8,374.62
3 $8,374.62 $41.87 $7,593.61 $860.66 $818.79 $7,555.83
4 $7,555.83 $37.78 $6,766.61 $860.66 $822.89 $6,732.94
5 $6,732.94 $33.66 $5,935.47 $860.66 $827.00 $5,905.94
6 $5,905.94 $29.53 $5,100.18 $860.66 $831.13 $5,074.81
7 $5,074.81 $25.37 $4,260.71 $860.66 $835.29 $4,239.52
8 $4,239.52 $21.20 $3,417.05 $860.66 $839.47 $3,400.05
9 $3,400.05 $17.00 $3,417.05 $860.66 $843.66 $2,556.39
10 $2,556.39 $12.78 $2,569.17 $860.66 $847.88 $1,708.50
11 $1,708.50 $8.54 $1,717.05 $860.66 $852.12 $856.38
12 $856.38 $4.28 $860.66 $860.66 $856.38 $0.00

How to Create an Amortization Schedule

The amortization schedule contains the following columns for each period.

  1. Period: It is the period for which the calculations are made. You start with 1 and then keep adding 1 to each subsequent period.
  2. Starting Balance: It is the unpaid principal balance from the previous period. For the first period use the original loan amount.
  3. Interest: It is the periodic interest which is calculated by multiplying periodic rate with starting balance. Periodic rate is annual interest rate divided by the number of compounding periods. For mortgages, it is interest rate divided by 12.
  4. New Balance: It is the amount you owe if you want to pay off the loan at the end of the period. It equals Starting balance plus Interest.
  5. Periodic Payment: It is the monthly payment. It stays the same for each period.
  6. Principal Reduction: It is the amount of loan amount you pay down each period. It equals periodic payment minus interest.
  7. Unpaid Principal Balance (UPB): It is the loan amount you owe at the end of the loan period. It equals Starting Balance plus interest minus periodic payment. It may also be referred to as the ending balance.

Key Consideration for Borrowers

Adjustable Rate Mortgages

In case of adjustable rate mortgage (ARM) loan, a change in interest rate will change the amortization schedule and the monthly payment for all remaining periods. The amortization schedule that the loan originator gives you at the time of loan origination is based on the initial interest rate only. As a borrower, you should realize that if the rate goes up the payments may go up significantly and the amortization schedule will look quite different. In these cases you may want to ask the loan originator to provide you with an amortization schedule that is based on a higher interest rate, a rate that you believe is likely to be prevalent in the future. In fact, go further and ask for a schedule based on the highest rate allowed under the loan (rate cap) and see how the schedule looks for you.

Mortgages with Introductory or Initial Interest Rates

Be aware of loans that have an introductory or initial rate. Some lenders create ingenious loan products where the initial interest rate is quite low and have low monthly payments. Once the initial rate expires, which is usually in a short period of time, the rate and monthly payments increases dramatically and makes the amortization schedule look quite unappealing. Ask the loan originator for the amortization schedule based on the rate that will be applicable when the introductory interest rate expires. This will give you a true picture of the loan that you are getting into.


Document Summary

Amortization Schedule
Amortization schedule shows the application of monthly payment towards principal and interest during the life of the loan.
Use in Mortgages
Amortization schedule can be used to track the loan balance over the life of the loan.
Other Names
Amortization Table
Provided By
Lender or Loan Originator
Provided To
Notarization Required
Signed By
Life Cycle Stage
None required
Model Form
Applicable Laws

Tools and Resources


Sample Amortization Schedule

  1. Sample Amortization Schedule

Updated: Aug 06, 2013


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It shows the application of monthly payment towards principal and interest during the life of the loan.
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