How a loan payment splits between interest and principal over time.
Amortization is the schedule that turns a loan into a fixed monthly payment. Every payment covers the interest owed for that month first; whatever is left reduces the principal.
Early on, almost all of the payment is interest. As the balance falls the interest portion shrinks, so the same payment kills more principal each month. That is why the final years of a mortgage pay it down far faster than the first years.
It is also why an extra payment made early saves far more than the same payment made late.
At today's 6.76% 30-year rate, a $400,000 mortgage costs about $2,597 a month. Of the very first payment, roughly $2,253 is interest and only about $344 touches the balance.
See the 30-yr mortgage page