Amortization Calculator

What This Calculator Does

Monthly payment. The fixed amount you pay each month, covering both principal and interest. This is the number most people need first.

Full amortization schedule. A month-by-month (or year-by-year) table showing four values for every payment: the payment amount, how much goes to interest, how much goes to principal, and the remaining loan balance.

Total interest paid. The sum of all interest charges over the life of the loan — the true cost of borrowing beyond the loan amount itself. On a typical 30-year mortgage, total interest often exceeds the original loan amount.

Extra payment modeling. Enter a recurring monthly extra payment, a one-time lump sum, or both. The calculator recalculates the schedule showing how many months you shave off the loan and how much interest you save.

Principal vs. interest breakdown. A visual summary showing the proportion of each payment (or the total loan) allocated to principal versus interest.

How to Use the Calculator

Step 1 — Enter your loan amount. This is the principal — the amount you borrow (not the purchase price). For a mortgage, it is the home price minus your down payment.

Step 2 — Enter your annual interest rate. The rate on your loan agreement. Note: this is the interest rate, not the APR. The APR includes fees and points; the interest rate is what the amortization formula uses.

Step 3 — Enter the loan term. The number of years (or months) over which you will repay the loan. Common mortgage terms are 30, 20, and 15 years. Auto loans are typically 3–7 years. Personal loans range from 1–7 years.

Step 4 — Enter extra payments (optional). If you plan to pay more than the minimum, enter the extra amount here. You can model a monthly extra payment, a one-time lump sum at a specific month, or both.

Step 5 — Review your results. The calculator returns your monthly payment, total interest, total cost (principal + interest), payoff date, and a full amortization schedule you can scroll through or export.

The Amortization Formula

The standard formula for calculating a fixed monthly payment on an amortized loan is:

M = P × [r(1 + r)ⁿ] / [(1 + r)ⁿ − 1]

Where: M = monthly payment, P = principal (loan amount), r = monthly interest rate (annual rate ÷ 12), n = total number of payments (loan term in years × 12).

This formula produces a constant monthly payment that, when applied over n months, pays off the loan in full — including all accumulated interest — exactly on schedule.

Worked Example: 30-Year Mortgage

Loan amount: $350,000. Annual interest rate: 6.5%. Loan term: 30 years (360 payments).

Monthly rate: 6.5% / 12 = 0.5417% = 0.005417. n: 360.

M = 350,000 × [0.005417 × (1.005417)³⁶⁰] / [(1.005417)³⁶⁰ − 1] = 350,000 × [0.005417 × 6.9913] / [6.9913 − 1] = 350,000 × 0.03787 / 5.9913 = 350,000 × 0.006321 ≈ $2,212

Total paid over 30 years: $2,212 × 360 = $796,320. Total interest: $796,320 − $350,000 = $446,320.

The borrower pays $446,320 in interest on a $350,000 loan — 127% of the original principal. This is the number that shocks most first-time homebuyers and the primary reason people explore shorter loan terms or extra payments.

How the First and Last Payments Compare

In the first payment, 86% goes to interest and only 14% goes to principal. In the last payment, those proportions are essentially reversed. This front-loading of interest is the defining feature of amortization — and the reason early extra payments are so powerful.

Worked Example: Effect of Extra Payments

Using the same $350,000 mortgage at 6.5% for 30 years, what happens if the borrower adds $300/month in extra principal payments?

An extra $300/month — about a 14% increase in payment — eliminates 9 years of payments and saves nearly $169,000 in interest. The savings are so dramatic because each extra dollar goes directly to principal, which immediately reduces the balance on which future interest is calculated. It is a compounding effect in reverse.

Diminishing Returns of Extra Payments

The first $100/month of extra payments saves $69,228 in interest. The next $100 saves an additional $54,443 — still huge, but less per dollar than the first $100. This is the diminishing-returns curve: each additional dollar of extra payment saves less than the previous dollar because there is less remaining interest to avoid. However, every extra dollar still saves multiple dollars in interest — the ROI is always positive.

30-Year vs. 15-Year Mortgage Comparison

The most common dilemma for homebuyers is choosing between a 30-year and a 15-year mortgage. Here is a side-by-side comparison for a $350,000 loan:

The 15-year mortgage costs $724 more per month but saves $267,789 in total interest — a trade-off of short-term cash flow for long-term savings. Note that 15-year mortgages typically carry lower interest rates than 30-year loans (5.9% vs. 6.5% in this example), which amplifies the savings.

The hybrid strategy: Take a 30-year mortgage for payment flexibility but make extra payments as if it were a 15-year loan. If financial circumstances change, you can drop back to the minimum payment without refinancing. This gives you the amortization benefits of a shorter term without the obligation.

How Amortization Works — The Interest Front-Loading Effect

In an amortized loan, the monthly payment is constant but its composition changes every month. Interest is calculated on the remaining balance, so:

When the balance is high (early in the loan), interest charges are high and principal payments are low. As the balance decreases, interest charges shrink and more of each payment goes to principal. The crossover point — where principal exceeds interest within each payment — typically occurs around the midpoint of the loan term for a 30-year mortgage.

For the $350,000 example above, the crossover happens around year 18. For the first 18 years, the majority of every payment goes to interest. This is why homeowners who sell after 5–7 years often feel like they have barely paid down their mortgage — because they largely have not. After 5 years of payments on this loan, the remaining balance is still approximately $326,000. The borrower has paid $132,720 in total payments but has only reduced the principal by about $24,000.

Amortization Schedule Sample (First 12 Months)

For the $350,000 loan at 6.5%, 30-year term:

After 12 full payments totaling $26,544, the borrower has reduced the principal by only $3,910 — about 1.1% of the original loan. The remaining $22,634 went to interest. This table is why financial literacy advocates stress the importance of understanding amortization before signing a mortgage.

What Amortization Applies To

This calculator works for any fixed-rate, fully amortizing loan:

Mortgages. The most common use case. Both conventional and FHA/VA loans amortize over their stated term (typically 15 or 30 years). ARM (adjustable-rate) mortgages amortize during their fixed-rate period but require recalculation when the rate adjusts.

Auto loans. Typically 3–7 year terms. The same amortization dynamics apply — early payments are interest-heavy — but the total interest is lower because the loan amounts and terms are smaller.

Personal loans. Fixed-rate personal loans from banks, credit unions, or online lenders amortize over 1–7 years.

Student loans. Federal and private student loans on standard repayment plans are amortized, typically over 10 years.

What this calculator does NOT cover: Interest-only loans (no principal reduction during the interest-only period), revolving credit (credit cards, HELOCs), or adjustable-rate loans after the rate changes.

The True Cost of Different Interest Rates

Small differences in interest rates produce enormous differences in total cost over long loan terms. Here is the impact on a $350,000, 30-year mortgage:

The difference between a 5.0% and 7.0% rate is $449 per month — but $161,886 in total interest over 30 years. This is why shopping for even a 0.25% lower rate is worth the effort: on this loan, 0.25% saves roughly $20,000 in lifetime interest.

Biweekly Payments: An Automatic Extra Payment Strategy

Instead of making 12 monthly payments per year, some borrowers make 26 biweekly (every two weeks) payments. Each biweekly payment is exactly half the monthly amount.

The trick: 26 biweekly payments equal 13 monthly payments per year instead of 12 — you make one extra monthly payment annually without feeling the pinch.

Impact on the $350,000 example at 6.5%:

Switching to biweekly payments saves $83,312 in interest and cuts nearly 5 years off the loan — all by making the equivalent of one extra monthly payment per year. Many lenders and third-party services offer biweekly payment plans, though you can achieve the same result by simply dividing your monthly payment by 12 and adding that amount as extra principal each month.

When Extra Payments Make Sense (and When They Don’t)

Extra payments make sense when: Your mortgage interest rate is higher than what you could earn investing after taxes. You value the psychological benefit of being debt-free. You are close to a key threshold (like dropping below 80% loan-to-value to eliminate PMI). You have already funded your emergency reserve and retirement contributions.

Extra payments may NOT be optimal when: You carry higher-interest debt (credit cards, personal loans) — pay those first. Your emergency fund is inadequate — liquidity matters more than principal reduction. Your mortgage rate is very low (below 4–5%) and you could earn more investing the difference. You would need to forgo employer-matched retirement contributions to make extra payments. Your loan has a prepayment penalty (check your terms).

The mathematical answer depends on comparing your mortgage rate to your expected after-tax investment return. If your mortgage is at 6.5% and you expect 8% from equities (taxed at a lower capital gains rate), the comparison is closer than it appears. There is no universally correct answer — it depends on your rate, tax situation, risk tolerance, and financial goals.