Amortization

Amortization is the schedule by which a loan is paid off in equal installments, with each payment split between interest and principal. Here's the twist most people miss: early on, almost your entire payment is interest — near the end, it's almost all principal. Same payment every month, completely different split underneath.

Example: On a $400,000 mortgage at 6.5%, your first $2,528 payment is $2,167 interest and just $362 principal.