If you’re looking into getting a mortgage for the first time, congratulations! You’re about to embark on a brave new adventure, full of highs and lows with (ideally) a wonderful reward, aka your new home, at the finish line.
But before you get there, you’ll need to navigate some challenges. For instance: the somewhat intimidating home-buying terminology: prequalification vs. preapproval, for instance. And what on earth is escrow? And what does amortized mean?
Here, you’ll learn the answer to that last question, quickly and painlessly. Basically, mortgage amortization means that your mortgage loan payments will be spaced out over a period of time (typically 30 years) and will be calculated so that you always pay the same amount per month (if you have a fixed-rate mortgage, not a variable rate mortgage, that is).
That means that if you get a fixed-rate mortgage and your first payment in your first month is $1,500, you know that you’ll pay $1,500 in the last month of your mortgage, years later. If you take out a variable rate mortgage, the amount you pay each month will change periodically as the market rate fluctuates.
Also, as you make mortgage payments at first, most of the money paid goes toward interest and a little to the principal, but that shifts over time to the opposite scenario.
Learn more about mortgage amortization here.
Key Points
• Mortgage amortization involves consistent monthly payments that gradually pay off both principal and interest over the loan term.
• Amortized mortgage payments are structured to initially cover more interest, shifting to more principal over time.
• Online calculators simplify the process of calculating amortization by letting you input loan details to see your payment breakdowns.
• Advantages of an amortized mortgage include steady principal reduction and consistent payments.
• Disadvantages may include higher down payment requirements and lower borrowing limits than other mortgage types.
Why Do People Choose Amortized Mortgages?
Mortgage amortization helps ensure that your obligations are predictable, which can make it easier for you to plan. If you take out a 30-year mortgage, then the amortization helps guarantee that in 30 years, you will have finished paying it off. For a fixed-rate mortgage, amortization also keeps all your payments consistently the same amount, rather than different amounts that depend on how much your principal is.
Recommended: The Different Kinds of Mortgages
How to Calculate Amortization Using Tables
In real life, even if you choose an amortized mortgage, you may never need to figure out your 30 years or so of payments yourself. But it’s useful to see what goes into the table of payments (they’re not arbitrary!) and understand how it’s populated. Calculating your amortized mortgage really puts you on the front lines of homebuying.
Let’s say you take out a $300,000 mortgage over 30 years at a 6.50% fixed interest rate. That means your monthly payment will be $1,896. You can then divide your interest rate by 12 equal monthly payments to get your monthly interest rate. That works out to 0.5417% of interest per month. And multiplying that interest rate by your total balance, which at the time of your first payment is $300,000, shows that in the first month of your loan, you’ll pay around $1,625 toward interest and the remaining $271 toward your principal.
Next, to calculate the second month, you’ll need to deduct your monthly payment from the starting balance to get the ‘balance after payment’ for the chart. You’ll also need to put the $1,625 you paid in interest and $271 you paid toward the principal in the chart. Then you can repeat the calculation of your monthly interest and principal breakdown, and continue inputting until you finish completing the chart.
| Date | Starting Balance | Interest | Principal | Balance after payment |
|---|---|---|---|---|
| Jan. 2026 | $300,000 | $1,625 | $271 | $299,729 |
| Feb. 2026 | $299,729 | $1,624 | $273 | $299,456 | Mar. 2026 | $299,456 | $1,622 | $274 | $299,182 |
| Apr. 2026 | $299,182 | $1,621 | $276 | $298,906 |
| May. 2026 | $298,906 | $1,619 | $277 | $298,629 |
| Jun. 2026 | $298,629 | $1,618 | $279 | $298,351 |
| Jul. 2026 | $298,351 | $1,616 | $280 | $298,070 |
| Aug. 2026 | $298,070 | $1,615 | $282 | $297,789 |
| Sep. 2026 | $297,789 | $1,613 | $283 | $297,506 |
| Oct. 2026 | $297,506 | $1,611 | $285 | $297,221 |
| Nov. 2026 | $297,221 | $1,610 | $286 | $296,935 |
| Dec. 2026 | $296,935 | $1,608 | $288 | $296,647 |
💡 Quick Tip: SoFi’s new Lock and Look* feature allows you to lock in a low mortgage financing rate for up to 90 days while you search for the perfect place to call home.
How to Calculate Amortization Using a Calculator
So you can see that it’s not so much difficult to calculate your amortized payments as it is time-consuming. Fortunately, you can save yourself the trouble by using an online amortization calculator . All you have to do is input info about your mortgage, including the amount you’re borrowing, your term length, and the interest you’re paying, and the calculator will do the math for you.
Recommended: First-Time Homebuyer Guide
What Are the Pros of an Amortized Mortgage?
Here are some of the benefits to consider:
• You’ll slowly but surely pay off the mortgage principal of your home loan. With every month, you’ll get closer to owning your home outright!
• It ensures that you pay a set amount for each payment over the life of your loan. With some loans you may end up paying more at the beginning or the end. A balloon mortgage, for example, requires you to pay interest charges monthly during the regular term. You then pay off large parts of the principal at the end of the loan period. (Thus, your payment literally balloons.)
• You can often get better terms with an amortized loan. And you’ll save money in the long run if you’re paying less interest over the life of your mortgage.
Recommended: What Is PMI and How to Avoid It
What Are the Cons of an Amortized Mortgage?
Next, consider the downsides:
• Amortized mortgages may favor borrowers who are putting down a larger down payment. To qualify for a competitive interest rate, you’ll probably need to put down 10% (if not 20%).
• You might not be able to qualify to borrow as much money via an amortized mortgage as you would through an alternative mortgage, such as an interest-only mortgage or a balloon mortgage.
The Takeaway
An amortized mortgage can be a good option for many homebuyers. It provides a steady way to pay down the principal of your home loan.
Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.
FAQ
Is it better to have a longer or shorter mortgage term?
It depends on what you can afford. If you have a shorter mortgage term, your monthly payments will be higher, but you will pay less in interest over the (shorter) life of your loan. If your term is longer, your payments will be smaller, but you will be making them for longer and you’ll pay more in interest over the term.
Why are mortgage loans amortized?
Mortgage loans are amortized so that homeowners will pay the same amount of money every month during the duration of their home loan, even though the balance between how much of that payment is for principal and how much is for interest will change. The predictability makes it easier for both the borrower and the lender to plan.
What is the alternative to an amortized loan?
The alternative is called a nonamortizing loan, meaning a loan for which the payment isn’t paid back gradually, over time, but all at once in a lump sum. Balloon-payment mortgages and interest-only mortgages are nonamortizing mortgages.
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