MrCalculators Logo

ADVERTISEMENT

Mobile Banner
320×100

Amortization Calculator

Calculate loan payments and create amortization schedules

Amortization Formulas

Monthly Payment
Loading formula...
Total Interest
Loading formula...
Principal Portion
Loading formula...

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

Metric30-Year15-YearDifference
$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 Interest83%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.

How to use this amortization calculator

  1. Enter the Loan Amount ($) — the principal you are borrowing, not the full purchase price if you are putting money down.
  2. Enter the Annual Interest Rate (%) — use the lender's APR for an honest comparison, not the headline teaser rate.
  3. Enter the Loan Term (years) — common values are 30, 20, 15, 10, or 5; the schedule scales automatically.
  4. Optional: enter an Extra Monthly Payment ($) to see how additional principal payments shorten the payoff date and cut total interest.
  5. Click Calculate Schedule to see your monthly payment, total interest, payoff date, and a year-by-year breakdown of principal and interest.

Examples

Basic: 30-year loan at a fixed rate

A homeowner takes out a $250,000 amortizing loan at 6.5% over 30 years and wants to see the monthly payment plus how interest and principal split early in the schedule.

ResultMonthly payment about $1,580. Total of payments about $569,000 over 30 years. Total interest roughly $319,000. In month 1, about $1,354 is interest and only $226 is principal.

The calculator uses M=P⋅r(1+r)n(1+r)n−1M = P \cdot \frac{r(1+r)^n}{(1+r)^n - 1} with P=250,000P = 250{,}000, r=0.065/12≈0.005417r = 0.065/12 \approx 0.005417, and n=360n = 360. It then walks period by period: each month's interest is the current balance times rr, and whatever remains of the fixed payment reduces principal. Because the balance starts at $250,000, the first month's interest alone is $1,354, which is why early payments barely move the balance.

Intermediate: 5-year auto loan schedule

A buyer finances a $35,000 car at 7.5% APR over 5 years and wants the full amortization schedule to confirm payoff timing and total interest.

ResultMonthly payment about $701. Total of payments about $42,090. Total interest roughly $7,090. By month 30 (halfway), the loan balance is already below $19,000 because shorter terms front-load principal much faster than 30-year loans.

Same formula, but with n=60n = 60 the denominator (1+r)n−1(1+r)^n - 1 is much smaller, so each payment retires far more principal. The first month's interest is $35,000 ×\times 0.075/12 = $218.75, leaving $482 to reduce principal. Year over year, the interest portion drops sharply because each month's balance falls quickly toward zero.

Edge case: extra payments to shorten a 30-year loan

Same $250,000 loan at 6.5% over 30 years, but the borrower adds $200 every month directly toward principal from the first payment onward.

ResultEffective monthly payment $1,780. Loan paid off in about 23 years 4 months instead of 30. Total interest drops to roughly $237,000 — a saving of about $82,000 versus the no-extra baseline.

The base payment stays $1,580, but the calculator credits the extra $200 directly to principal each month. Because every following month computes interest on the new, lower balance, the interest portion shrinks faster than scheduled. The schedule terminates as soon as the remaining balance drops to zero, which is why the loan ends about 6 years 8 months early.

How it works

Amortization is the process of paying off a loan with equal periodic payments where each payment covers the interest accrued since the last payment, with the remainder applied to principal. The calculator computes the fixed monthly payment using M=P⋅r(1+r)n(1+r)n−1M = P \cdot \frac{r(1+r)^n}{(1+r)^n - 1}, where PP is the loan amount, rr is the periodic interest rate (annual rate divided by 12), and nn is the total number of payments (years ×\times 12).

Once MM is known, the calculator iterates through each period. For each month, it computes interest as (current balance ×r\times r), subtracts that from MM to get the principal portion, then reduces the balance accordingly. This is why an amortization schedule shows interest dropping and principal rising over time even though the total payment never changes.

If you enter an Extra Monthly Payment, that amount is added to the principal portion every period. Because future interest is always computed on the new balance, even small extras compound into large lifetime savings and shorten the payoff date. The schedule loop ends the instant the remaining balance reaches zero, not on the original scheduled date.

The total interest figure is simply (M ×n\times n) − P for the base loan, or the sum of every period's interest entry when extra payments are involved. The payoff date is calculated forward from today by the number of months actually required to retire the loan.

When to use this calculator

  • Comparing loan offers across terms. Run the same Loan Amount and Annual Interest Rate with different Loan Term values to see how 15-year, 20-year, and 30-year schedules differ in monthly payment and total interest.
  • Modeling extra payment strategies. Use the Extra Monthly Payment field to test biweekly-equivalent payments, round-up plans, or a flat $50–$500 extra to see exactly how much time and interest you can save.
  • Understanding the interest-vs-principal split. When you are early in a long-term loan, the schedule shows why your balance moves slowly — most of the payment is going to interest. This is useful for planning refinances or principal-reduction decisions.
  • Budgeting for any amortizing loan. Beyond mortgages, the same math drives auto loans, student loans, personal loans, and equipment financing. Enter your principal, APR, and term to model any of them.
  • Verifying a lender's payment quote. If your lender's monthly payment quote does not match this calculator on the same principal, rate, and term, ask them to break out any fees, escrow, or insurance bundled into the payment.

Common mistakes

  • MistakeConfusing total interest with the loan's stated interest rate.
    FixThe rate is the cost per year on the remaining balance. Total interest depends on rate, term, and how the balance amortizes — a 6.5% loan over 30 years can cost more in interest than the original principal.
  • MistakeEntering the home price or vehicle price instead of the financed amount.
    FixSubtract any down payment, trade-in, or cash contribution first. Loan Amount is the principal the lender is actually advancing.
  • MistakeUsing a monthly rate when the field asks for an annual rate.
    FixThe Annual Interest Rate (%) field expects the APR (e.g., 6.5), not the monthly periodic rate. The calculator divides by 12 internally.
  • MistakeAssuming extra payments automatically reduce the next month's required payment.
    FixOn most amortizing loans, extras shorten the term but do not lower the next scheduled payment. To re-amortize at a lower payment, you usually need to request a loan recast from the servicer.
  • MistakeIgnoring fees, taxes, and insurance bundled into a lender's monthly figure.
    FixThis calculator shows pure principal and interest. If your lender's quote is higher, the difference is typically escrow for property tax, insurance, PMI, or HOA — not a math error.

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 because future interest is computed on a smaller balance.

Should I pay extra on principal?

If your loan rate exceeds what you'd earn investing after tax, extra payments are smart. At a 6% mortgage, you'd need to earn 6%+ after tax to beat it. Also consider the guaranteed return, no market risk, and peace of mind that come with paying down debt.

What's the difference between APR and interest rate?

Interest rate is the annual cost of borrowing the principal. APR includes the rate plus fees, points, and other lender costs — it's the truer annual cost. APR is always equal to or higher than the interest rate, which is why CFPB guidance recommends comparing offers on APR, not rate.

How is amortization different from a mortgage?

Amortization is the math; a mortgage is one product that uses it. The same formula M=P⋅r(1+r)n(1+r)n−1M = P \cdot \frac{r(1+r)^n}{(1+r)^n - 1} drives auto loans, student loans, personal loans, and equipment financing. This calculator works for any fixed-rate, fully amortizing loan, not just mortgages.

Why is more interest paid early in the loan?

Interest each period is computed on the current outstanding balance. At the start, the balance is the entire principal, so the interest portion of the payment is at its maximum. As principal gets paid down month after month, the interest portion shrinks and the principal portion grows — even though the total payment stays flat.

Can I see the full payment-by-payment schedule?

Yes. The calculator computes every period in memory and surfaces an annual summary on screen (principal paid, interest paid, and balance at year-end). The underlying schedule is generated by the amortization-schedule utility used across the site and aligns with the formulas printed above the calculator.

How do extra payments affect the schedule?

Every dollar of Extra Monthly Payment is applied to principal after that period's interest is paid. The next period then computes interest on the lower balance, so the interest portion shrinks faster than scheduled. The schedule ends as soon as the balance reaches zero, which is typically months or years earlier than the original term.

Is my mortgage interest tax deductible?

In the United States, you can generally deduct interest on up to $750,000 of qualified home acquisition debt ($375,000 if married filing separately) for loans originated after December 15, 2017, but only if you itemize. Auto and personal loan interest is not deductible. See IRS Publication 936 for the current rules.

Does the calculator support biweekly payments directly?

Not as a separate frequency in this form, but you can approximate biweekly payments by adding 1/12 of your monthly payment to the Extra Monthly Payment field. That produces 13 effective monthly payments per year, which is the same total principal reduction as a true biweekly plan.

Why does my payoff date differ from my servicer's?

The calculator assumes you make exactly the scheduled payment plus any extras every month, on time, with no rate changes. Real loans include prepayments, recasts, escrow adjustments, and rate resets that shift the actual payoff date. Treat the on-screen payoff date as a planning estimate; ask your servicer for an authoritative payoff statement.

What if the interest rate is 0%?

When the rate is zero, the formula collapses to M=P/nM = P / n — equal principal payments with no interest. The calculator handles this case explicitly, so a 0% promotional auto or appliance loan will display as a clean principal-only schedule with zero total interest.

Sources

Methodology

This calculator applies the standard amortization formula M = P·r(1+r)^n / ((1+r)^n − 1), where M is the periodic payment, P is the loan amount, r is the periodic interest rate (annual rate ÷ 12), and n is the total number of monthly payments (years × 12). It then iterates period by period: each month's interest is the current balance times r, the remainder reduces principal, and any Extra Monthly Payment is applied directly to principal. The loop ends when the balance reaches zero, which produces the payoff date and the year-by-year principal/interest summary. The same formula also handles 0% loans via the M = P / n fallback.

Learn more about our methodology →

Pro Tips

  • Bookmark this calculator for quick access in the future
  • Use the share button to send your results to others
  • Try different scenarios to compare outcomes
  • Check out our related calculators for more insights

Found this calculator helpful? Share it with others:

Embed this calculator

Related Calculators

Sales Tax CalculatorCalculate sales tax, total price, or reverse-calculate the pre-tax amount from any price.Dividend CalculatorCalculate your dividend income and see how reinvesting dividends accelerates wealth buildi...GDP Income CalculatorCalculate GDP using the income approachNet Worth CalculatorCalculate your net worth by totaling your assets and subtracting your liabilities. Track y...