In short
- Each instalment is part interest and part principal, and the split changes over time.
- Early instalments are mostly interest, which is why early prepayment saves the most.
- The schedule is the honest answer to what a loan really costs.
What the schedule is
An amortisation schedule is a table, period by period, showing the opening balance, the interest charged, the principal repaid, the instalment, and the closing balance. Ask for it before you commit to a loan; it turns an abstract set of terms into a sequence you can actually read.
Why early payments are mostly interest
Interest is charged on the outstanding balance, and the balance is largest at the start. So in the early years, most of each instalment is interest and only a small part reduces the principal. This is not a trick; it is how amortisation works, and it explains why the balance falls slowly at first.
The crossover
At some point the split reverses and principal begins to exceed interest. The longer the tenure, the later that crossover arrives. On a long loan, several years can pass before you are meaningfully paying down what you borrowed.
What it shows about tenure
A longer tenure lowers the instalment and raises the total interest. You can see this directly in the schedule: the total of the interest column grows as the tenure extends. The instalment is the visible number; the total interest is the real one.
What it shows about prepayment
A prepayment removes principal from the top of the schedule, which removes all the interest that would have been charged on that principal for the rest of the loan. That is why prepaying early saves more than prepaying late: there is more future interest to remove.
How to use it
Compare loans by their total interest, not by their instalment. Use the schedule to see when the crossover happens and how much interest sits ahead of you. And if you plan to prepay, look at where in the schedule you would be doing it.
Questions this raises
Why is my balance barely moving in the early years?
- Because the early instalments are interest-heavy. Principal repayment accelerates later in the schedule.
Does prepayment show up on the schedule?
- Yes. A prepayment reduces the outstanding balance, which lowers the remaining interest and can shorten the loan.
Read the full guidance on home loan.