What is mortgage amortization and how can it help you understand your mortgage?

What is mortgage amortization and how does it work?
For uninsured conventional (standard) mortgages, the maximum amortization is 30 years.
If the mortgage is default insured, then the maximum amortization is 25 years or 30 years for First-Time Home Buyers purchasing a property and for customers purchasing an owner-occupied newly built home (New Construction) where Loan To Value (LTV) must be greater than 80%. Applicable premium rates apply.
Home purchase price
Down payment
Interest rate
Mortgage payment
Principal paid
Interest paid
Home purchase price
Down payment
Interest rate
Mortgage payment
Principal paid
Interest paid
This chart is for illustrative purposes only. All figures are directional. Source: BMO Mortgage Payment Calculator
If you go with the longer amortization period of 25 years, you can reduce monthly payments by about $600. On the other hand, you pay more in interest payments, meaning it takes longer to pay off your mortgage balance.
Making extra lump sum payments can also affect your mortgage amortization, shortening the amortization period and allowing you to save money on interest. Extra payments may lower your amortization but won’t affect your payment within your current term. It affects the ratio of what goes toward principal and what goes toward interest. That’s why it’s important to understand the impact of rising interest rates.
What is an amortization schedule and how does it work?
An amortization schedule shows the total amount of time it’ll take until your mortgage is paid off. This is based on the term you select when you take out the mortgage. More importantly, it breaks down mortgage payments and illustrates how much is allocated toward your principal balance and the interest. Year by year, you’ll see where your payments are going and see your loan balance go down.
As part of your amortization schedule, you’ll typically see:
The month or year
The mortgage payment
The amount that goes toward interest
The amount that goes toward principal
Your remaining balance
Here’s a sample amortization schedule based on a $400,000 home with 20% down and a $320,000 mortgage with a 5-year fixed term. The interest rate is 6.49% and the amortization period is 25 years.
Year
Mortgage Payment
$19,273
Principal paid
$5,206
Interest paid
$14,067
Balance
$314,794
Mortgage Payment
$25,698
Principal paid
$5,704
Interest paid
$19,994
Balance
$309,090
Mortgage Payment
$25,698
Principal paid
$6,081
Interest paid
$19,617
Balance
$303,009
Mortgage Payment
$25,698
Principal paid
$6,482
Interest paid
$19,216
Balance
$296,526
Mortgage Payment
$25,698
Principal paid
$6,910
Interest paid
$18,788
Balance
$289,616
This table is for illustrative purposes only. All figures are directional. Source: BMO Mortgage Payment Calculator
How does mortgage renewal affect your remaining amortization?
How do you calculate mortgage amortization?
To calculate mortgage amortization, you need your mortgage loan amount as well as rate and payment. All these factors will determine your monthly payments and therefore your amortization period. The easiest way to see the impact that mortgage amortization has on your mortgage payments is through the BMO Mortgage Payment Calculator.
FAQs
Ready to begin?
Look into pre-qualification or pre-approval or talk to an expert that can help.
Get pre-qualifiedGet pre-approvedHelpful tools
Mortgage Rates
Take a look at today's special mortgage rates and find out which best suits your homebuying needs.
Mortgage Payment calculator
Calculate how much you’d spend each month to buy a home or renew or refinance your mortgage.
Related Articles

Fixed vs variable rate: Pros and cons of each
Mortgages aren’t one-size-fits-all. Here’s what you need to know about fixed vs. variable rate mortgages, so you can pick the one that’s right for you.

Mortgage Basics
Learn how a mortgage works, how to build equity, and what terms like amortization actually mean.
Have questions?
- footnote star details Subject to meeting BMO’s standard lending criteria. Appraisal and other fees may apply. Please consult your lending agreement(s) or contact a BMO representative.