Mortgage guide · worked examples in GBP
How an amortization schedule works, payment by payment
An amortization schedule follows each payment from the opening balance to the closing balance. It explains why a fixed payment can repay more principal as the loan progresses.
Work through month one
Take a £200,000 repayment mortgage at 5% over 25 years. The scheduled payment is £1,169.18. Monthly interest is £200,000 × 5% ÷ 12 = £833.33. The principal portion is £335.85, leaving £199,664.15 after payment one. Displayed values are rounded; the model retains precision internally.
Repeat with the smaller balance
Month two starts from the previous closing balance. Its interest is £831.93, and £337.25 of the same payment reduces principal. At a fixed positive rate, declining balances mean less interest and more principal in subsequent payments.
Read the columns together
Opening balance is what you owe before a payment. Interest is the cost charged for that period. Principal is the portion that reduces the debt. Closing balance is opening balance minus principal. Total payment is interest plus principal. Annual tables aggregate payments and interest, while the closing balance is the balance after that year’s final payment.
Check the end of the schedule
A standard repayment loan should end at zero after the agreed term if all payments are made. Interest-only and mixed loans can end with a balance that still needs to be repaid. Do not interpret a final balance as already included in the ordinary monthly instalment.
Know where the model differs from a statement
This site assumes monthly payments and a nominal annual rate divided by 12. It does not reproduce every lender’s daily-interest convention or rounding. Payment dates, fees, missed payments and rate changes can all change a real statement. At zero interest, each scheduled payment is simply the principal divided by the number of months.