Amortisation (Amortization) Schedule Explained Australia

Short answer

An amortisation schedule (spelled "amortization" in US sources) breaks every repayment on a loan into its interest and principal components, period by period, from the first payment to the last. Because interest is charged on the outstanding balance, early repayments are mostly interest and later repayments are mostly principal — even though the total repayment amount stays fixed for a standard principal and interest loan.

How to read a schedule

Every row of a schedule represents one payment period, usually a month, and shows five figures: the period number, the fixed payment amount, how much of that payment is interest, how much is principal, and the closing balance after the payment is applied. The payment amount doesn't change across a standard fixed-term principal and interest loan — what changes is the split between interest and principal within it.

Reading down the interest column, the figure falls every period. Reading down the principal column, it rises every period, by exactly the same amount the interest fell — because the two columns always add up to the fixed payment amount. The closing balance column ties the two together: it's last period's balance, minus this period's principal.

Where to find your own schedule

Most lenders provide an amortisation schedule on request, or it can be generated instantly from the loan balance, interest rate, and term using a standard mortgage calculator. It's worth checking the schedule whenever the rate changes — a rate rise or fall recalculates every remaining period, shifting the interest-to-principal split even though the original schedule assumed a fixed rate for the full term. Variable-rate loans are re-amortised behind the scenes every time the rate moves, which is why the same loan balance can show a different remaining schedule from one year to the next.

Why early payments are interest-heavy: a worked comparison

Take a $500,000 loan at the 6.2% reference rate over 30 years, with a fixed monthly repayment of $3,062. In month 1, the full $500,000 balance attracts interest of $2,583 — about 84% of that first repayment — leaving only $479 to reduce the principal.

By month 300 (25 years in, with 5 years left on the term), the balance has fallen to roughly $160,000. The same $3,062 repayment now generates only $826 of interest — about 27% of the payment — so $2,236 goes to principal, almost five times as much as in month 1. The payment hasn't changed; only the balance it's calculated against has.

How extra repayments and offset shift the curve

• An extra repayment cuts straight into the closing balance for that period, which lowers every subsequent period's interest charge — the schedule effectively skips ahead to a later, more principal-heavy stage of the curve.
• An offset account works similarly but daily: the interest calculation uses (loan balance − offset balance), so a growing offset balance flattens the interest column without a formal extra repayment or affecting redraw flexibility.
• Either strategy shortens the schedule — fewer total periods are needed to reach a zero balance — which is exactly how both extra repayments and offset save total interest over the life of the loan.

P&I vs interest-only: a different shape

A principal and interest (P&I) schedule always has a rising principal column and a falling interest column, as shown above. An interest-only schedule looks completely different for its interest-only period: the payment column equals the interest column exactly, the principal column reads zero throughout, and the closing balance stays flat — the loan simply doesn't reduce. Once an interest-only period ends and the loan reverts to P&I, a new schedule starts from the unchanged original balance, amortised over whatever term remains — which is why repayments typically step up sharply at that point.