📘 What is an Amortization Schedule in Real Estate Investing?

An amortization schedule is a detailed table that breaks down each mortgage payment into principal and interest portions over the life of a loan. It helps investors see how their debt decreases over time and how much interest they’ll pay.

📌 When and Why It’s Used in Real Estate

Amortization schedules are crucial when analyzing long-term financing on investment properties. Investors use them to:

• Track the payoff timeline of a loan
  
• Understand how much interest vs. principal is paid monthly
  
• Forecast cash flow and tax deductions (especially on interest)
  
• Strategize refinancing opportunities
  

It's typically generated when you take out a fixed-rate loan or any loan with a structured repayment plan.

🧮 How It’s Calculated or Applied

Each payment in the amortization schedule is calculated using a formula that spreads the loan repayment over a set term, with more interest paid early on and more principal toward the end.

Formula to calculate monthly payment:

Where:

• P = loan principal
  
• r = monthly interest rate (annual rate ÷ 12)
  

n = total number of payments (loan term × 12)

Once calculated, each payment's breakdown is shown across the loan term in an amortization table, listing:

• Payment number
  
• Interest paid
  
• Principal paid
• Remaining balance
  

✅ Pros

• Helps plan for long-term debt payoff
  
• Visualizes how loan interest decreases over time
  
• Useful for tax planning and equity projections
  

⚠️ Cons

• Complex to understand without a calculator
  
• Assumes consistent payments; doesn’t factor early payoffs
  

Can be misleading if your rate is adjustable