An amortization table shows the schedule for paying off a loan, such as a mortgage. Learn how to make and use one to determine your own loan payoff schedule. You could use the amortization table for other types of loans such as student loans or personal loans, but it helps to know how to make one first. Understanding these can help you build a concrete plan for the long-term payoff of these types of loans. If you need help understanding your overall financial picture and how to plan for the future, considering enlisting a financial advisor.
How an Amortization Table Works and Why It’s Important
Amortization tables work best with lump-sum loans with fixed interest rates. They also work best with loans that you pay down gradually over time, and your payment is the same dollar amount each month. You can do this with a mortgage, but it works with car loans and personal loans as well.
The payments you make will be the same each month, but the amount of principal you pay on the loan versus the amount of interest you pay will change with each payment. You will gradually pay off more principal each month. An amortization table can show you how your payment breaks down to principal paid and interest paid, and will also keep track of how much principal you have left to pay.
Amortization tables do not typically show additional charges you pay on your loan, other than interest. For example, if you have to pay non-interest closing costs to get your mortgage, you should evaluate those fees separately.
The information in an amortization table makes it easier to compare lenders or loan options. If you are considering refinancing an existing loan or moving from a 15-year loan to a 30-year loan, the table can show the pros and cons.
While a low monthly payment may be enticing, interest costs shown on an amortization table show the true cost of a loan. A low payment may indicate more interest over an extended payment period.
How to Make an Amortization Table
If you’re working with a spreadsheet, you’ll probably want to make six columns. If you’re working with a pen, paper and calculator, you really only need five columns. The first is simple and titled “Month/Payment Period,” and the second column will be “Payment Amount.” The third column is “Interest Rate,” and it’s optional if you’re using a pen and paper. The fourth column is “Remaining Loan Balance.” The fifth column is “Interest Paid.” “Principal Paid” is the sixth column.
For this example mortgage amortization table, let’s use the following assumptions:
- Mortgage Term: 30 years
- Loan Balance: $240,000
- Interest Rate: 7%
- Monthly Payment: $1,596.73
In the first row, you’ll put $1,596.73 in the payment amount column, 7% in the interest rate column and start numbering the rows 1 through 12 in the month/payment period column.Under “Remaining Loan Balance,” in the first row, you put in new loan amount each month after your principal payments. The interest rate will not change in this case, unless you refinanced.
Next, multiply the interest rate by the starting loan balance and divide that by 12 for the monthly amount [($240,000 x .07) ÷ 12 = $1,400]. That $1,400 goes in as the first month’s “Interest Paid” value. To get the “Principal Paid” number, subtract that amount of interest paid from the monthly payment amount ($1,596.73 – $1,400 = $196.73). That would make the “Principal Paid” column’s value for the first month $196.73, though this interest to principal balance will begin to flip places slowly over the rest of the loan’s term.
To get “Remaining Loan Balance” after the first month’s payment, take the loan’s total value of $240,000, and subtract the “Principal Paid” value ($240,000 – $196.73 = $239,803.27). From then on, you’d simply repeat this process as you move through the months.
AnExample of an Amortization Table
For ease of use, the values in this table are rounded to the second decimal.
Amortization Table for First Year of Mortgage
| Month | Payment Amount | Interest Rate | Principal Paid | Interest Paid | Remaining Loan Balance |
| 1 | $1,596.73 | 7% | $196.73 | $1,400 | $239,803.27 |
| 2 | $1,596.73 | 7% | $197.88 | $1,398.85 | $239,605.39 |
| 3 | $1,596.73 | 7% | $199.03 | $1,397.70 | $239,406.36 |
| 4 | $1,596.73 | 7% | $200.19 | $1,396.54 | $239,206.17 |
| 5 | $1,596.73 | 7% | $201.36 | $1,395.37 | $239,004.81 |
| 6 | $1,596.73 | 7% | $202.54 | $1,394.19 | $238,802.27 |
| 7 | $1,596.73 | 7% | $203.72 | $1,393.01 | $238,598.55 |
| 8 | $1,596.73 | 7% | $204.91 | $1,391.82 | $238,393.64 |
| 9 | $1,596.73 | 7% | $206.10 | $1,390.63 | $238,187.54 |
| 10 | $1,596.73 | 7% | $207.30 | $1,389.43 | $237,980.24 |
| 11 | $1,596.73 | 7% | $208.51 | $1,388.22 | $237,771.73 |
| 12 | $1,596.73 | 7% | $209.73 | $1,387 | $237,562 |
How to Use an Amortization Table
You might want to know how quickly you could pay off a potential loan. If you have already taken out a loan, changing the monthly payment may affect the payoff date.
By choosing a 15-year loan over a 30-year period, a borrower can save on interest. Borrowers who can handle higher monthly payments often end up with a discount on short-term loans compared to long-term payments.
Those who can pay more than a loan’s interest rate will see rewards on the amortization table, too. Every dollar a borrower pays over the interest rate lowers the loan’s principal. That reduces the amount paid in interest the next month.
Financial Planning Tips
- If you’re considering taking out or altering a loan within your financial plan, you may want to talk to a financial advisor. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- Not every mortgage is right for your home or your financial circ*mstances. If you have questions about spending or payments, SmartAsset’s mortgage calculator can help you with the basics.
- Let’s say you own a home already, but are wondering how you can pay down you mortgage. You may want to consider refinancing. SmartAsset’s refinance calculator can help you make the most of your mortgage payment.
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