Amortization Calculator
Calculate loan payments and create amortization schedules
Amortization Formulas
Understanding Amortization
Amortization is the process of spreading a loan into equal periodic payments. Each payment covers interest charges and reduces principal. Early payments are interest-heavy; later payments are mostly principal—this is the amortization schedule.
For a $300,000 mortgage at 6% for 30 years, monthly payment is $1,799. Year 1, about $1,500/month goes to interest. Year 30, only about $9/month is interest. The same payment, but the split changes dramatically.
Understanding amortization helps with financial planning, comparing loan terms, and evaluating the impact of extra payments. A 15-year loan has higher payments but dramatically less total interest than a 30-year loan.
Amortization Key Concepts
Fixed Payments
Same payment each month, but interest/principal split changes over time.
Front-Loaded Interest
Early payments are mostly interest. It takes years before half the payment is principal.
Extra Payments
Additional principal payments shorten term and dramatically reduce total interest.
Amortization Schedule
Shows every payment with principal, interest, and remaining balance.
30-Year vs 15-Year Mortgage Comparison
| Metric | 30-Year | 15-Year | Difference |
|---|---|---|---|
| $300K @ 6% | $1,799/mo | $2,532/mo | +$733/mo |
| Total Payments | $647,515 | $455,683 | -$191,832 |
| Total Interest | $347,515 | $155,683 | -$191,832 |
| Interest % | 116% | 52% | -64% pts |
| First Payment Interest | 83% | 75% | -8% pts |
Strategies to Pay Off Faster
Round Up Payments
Round $1,799 to $1,800 or $1,900. Small extras add up over 30 years.
Biweekly Payments
Pay half monthly amount every 2 weeks = 26 half payments = 13 full payments/year.
Annual Lump Sums
Apply tax refunds, bonuses, or windfalls to principal. Even once yearly helps.
Refinance Shorter
If rates drop, refinance to a 15-year loan. Lock in savings and faster payoff.
Frequently Asked Questions
Why is so much interest charged early?
Interest is calculated on remaining balance. With $300K balance, 6% interest = $18K/year or $1,500/month. As you pay down principal, less interest accrues. It's not a trick—it's math on remaining balance.
How much does one extra payment save?
On a $300K, 30-year, 6% loan, one extra payment per year saves about $50,000 in interest and pays off 5 years early. The earlier you make extra payments, the more you save.
Should I pay extra on principal?
If your rate exceeds what you'd earn investing after tax, extra payments are smart. At 6% mortgage, you need to earn 6%+ after tax to beat it. Also consider: guaranteed return, no risk, peace of mind.
What's the difference between APR and interest rate?
Interest rate is the annual cost of borrowing. APR includes rate plus fees, points, and other costs—it's the true annual cost. APR is always equal to or higher than the interest rate.
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