Amortization is how a fixed-rate mortgage is paid down: each monthly payment is the same, but early payments are mostly interest and later payments mostly principal. The schedule that shows this split payment by payment is called an amortization schedule. Extra principal payments shorten it and reduce total interest.
Amortization explains why buyers build little equity in the first few years, why a 15-year loan saves so much interest, and why a recast lowers a payment. When a buyer asks 'why is so little going to principal?', this is the answer, and it frames conversations about extra payments and terms.
Example: on a $382,500 loan at 6.75% for 30 years, the first payment of about $2,481 includes roughly $2,152 of interest and $329 of principal. By year 20, more than half of each payment goes to principal.
Because interest is charged on the outstanding balance, which is highest at the start. As the balance falls, the interest share shrinks and the principal share grows, even though the payment stays the same.
Extra principal payments reduce the balance faster, which shortens the payoff and cuts total interest. The required payment stays the same unless the loan is recast or refinanced.
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