Amortization Calculator

The formula

M = P × [ r(1 + r)ⁿ ] ÷ [ (1 + r)ⁿ − 1 ]

M is the payment, P is what you borrow, r is the annual rate over twelve and n is the number of payments. Every row in the table above comes from applying that one payment repeatedly. Each month the interest is whatever the current balance times r comes to, the rest of the payment reduces the balance, and next month starts from the smaller number.

Worked example, using the default $340,000 at 6.66% over 30 years. The payment is $2,185. In the very first month, $1,887 of that is interest and only $298 touches the balance. Carry it to term and you pay $446,575 in interest, which is 131% of the loan again on top of repaying it.

Mortgage amortization

A mortgage is where amortization does its most extreme work, because 360 payments is long enough for the front-loading to get genuinely lopsided. Take a $300,000 loan at 6.5% over 30 years. The required payment is $1,896 a month. In month one, $1,625 of that is interest and only $271 goes to the balance, so 14% of your first payment is actually buying the house.

It stays lopsided for a long time. Principal does not overtake interest until month 233, which is year 19 of 30. For the first two-thirds of a standard mortgage you are paying the lender more than you are paying yourself, which is why the schedule is worth reading before you decide how long a term to take.

Two things a mortgage amortization schedule deliberately leaves out: property taxes and homeowners insurance. Those usually arrive in the same monthly bill through escrow, but they do not amortize and extra payments do not reduce them, so including them would only make the principal and interest split harder to read.

Why the early payments feel like they do nothing

This is the part that catches people out, and there's nothing underhand about it. Interest is charged on what you currently owe. You owe the most at the very beginning, so the interest slice is biggest then and the principal slice is smallest. As the balance falls the interest falls with it, and because the payment is fixed, the principal portion grows to fill the gap. The crossover, where more of your payment goes to principal than interest, arrives surprisingly late on a long loan.

Switch the table to the monthly view and you can watch it happen row by row. It also explains why refinancing or moving resets the clock: a new loan puts you back at the interest-heavy end of the schedule, even if the rate is better.

What an extra payment really buys

Put anything in the extra field and the summary shows two things: the interest you avoid and the time you cut off. Both come from the same mechanism. Money paid against principal today never accrues interest again for the rest of the term, so an extra payment early is worth far more than the same amount late. That asymmetry is the single most useful thing an amortization table teaches.

If it's a mortgage you already hold and you want to model this properly across several loans, the mortgage payoff calculator is built for exactly that. If you're still pricing a house, start with the mortgage calculator, which works back from purchase price and adds tax, insurance and PMI.

Reading the amortization schedule

The amortization schedule is the table itself, one row per payment, and each row answers the same four questions: how much interest this payment covers, how much principal it retires, anything extra you paid, and what is left afterwards. Read down the interest column and you watch the number shrink; read down the principal column and you watch it grow. The two always sum to your fixed payment, which is the whole idea of amortization: the payment stays flat while its composition rotates.

The schedule is worth printing for the years you care about rather than scrolling. Comparing your lender's statement against the row for that month is the fastest way to catch a misapplied payment, and it is the only view that shows exactly which month an extra payment removed from the end of the loan.

What this leaves out

Fees are not modelled. Origination charges, closing costs and any prepayment penalty sit outside the schedule, and a prepayment penalty in particular can undo the case for extra payments entirely, so check your loan agreement before acting on the savings figure. Interest that compounds daily rather than monthly will differ slightly from these rows. And the auto, student and personal rates here are placeholders, not market data.