Amortization Calculator

What is an amortization calculator?

An amortization calculator shows where every payment on your loan goes. Part of each payment pays interest, and the rest reduces what you owe. The calculator lays this out month by month, or year by year, until the balance reaches zero.

You can use it for a mortgage, a car loan, a personal loan or a student loan. It works for any loan with fixed monthly payments.

Why the first years of a loan feel slow

Interest is charged on the balance you still owe. At the start, that balance is as large as it will ever be, so most of your payment goes to interest.

Take a $200,000 loan at 6.5% over 30 years. The monthly payment is $1,264.14. In the first month, $1,083.33 goes to interest and only $180.81 reduces the loan. Over the whole first year you pay about $12,934 in interest and reduce the balance by only about $2,235.

This is normal, and it's how every standard loan works. The balance falls faster each year because interest is charged on a smaller amount each month.

How the monthly payment is calculated

The payment is fixed for the whole loan:

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

• M is the monthly payment
• P is the loan amount
• r is the monthly interest rate (annual rate ÷ 12 ÷ 100)
• n is the number of monthly payments (years × 12)

For the example above: P = 200,000, r = 0.065 ÷ 12 = 0.005417, n = 360. That gives M = $1,264.14.

How to use this calculator

1. Enter the amount you're borrowing (the loan balance, not the purchase price).
2. Enter the yearly interest rate.
3. Enter the loan term in years.
4. Add an extra monthly payment if you want to test one. Leave it at 0 if not.
5. Click Generate Schedule, then switch between Yearly and Monthly views.

Tip: scroll the monthly view to find the row where the principal column becomes larger than the interest column. That's the crossover point. For the loan above it happens at payment 233, which is about 19 years and 5 months in.

Example: how the balance falls

Same loan: $200,000, 6.5%, 30 years. Here is what you still owe at each stage:

• After 1 year: $197,765
• After 5 years: $187,222
• After 10 years: $169,552
• After 15 years: $145,118
• After 20 years: $111,331
• After 25 years: $64,608

Halfway through the term (15 years), you still owe about 73% of the original loan. Many people are surprised by that. Over the full 30 years you'd pay $455,088.98 in total, of which $255,088.98 is interest.

What extra payments do

Any extra money you pay goes straight to principal (check this with your lender). A smaller balance means less interest every month after that.

Here's the same $200,000 loan at 6.5% with different extra monthly payments:

• No extra payment: paid off in 30 years, with $255,089 in total interest.
• Extra $100 a month: paid off in about 24 years 5 months, with $199,143 in interest. You save about $55,946.
• Extra $200 a month: paid off in about 20 years 10 months, with $165,012 in interest. You save about $90,077.
• Extra $500 a month: paid off in about 14 years 9 months, with $110,941 in interest. You save about $144,148.

Extra payments save more the earlier you start, because they cut interest for more months. The same $100 a month in year 1 saves much more than in year 20.

30-year or 15-year loan?

On the same $200,000 at 6.5%, a 15-year term has a payment of $1,742.21 and total interest of about $113,599. The 30-year term costs about $142,000 more in interest, but its payment is about $478 lower each month.

A shorter term saves money, but it also locks you into a higher required payment. Some people take the longer term and pay extra when they can, which keeps the lower payment as a safety net. Use the calculator to compare both.

Things this calculator doesn't include

• Property tax, home insurance, PMI and HOA fees (these are usually added to a mortgage payment)
• Origination fees, closing costs and prepayment penalties
• Variable or adjustable rates, since it assumes a fixed rate
• Differences in how your lender rounds payments or applies extra money

Your lender's schedule may differ by a few dollars. Always check the final figures with your lender.

Frequently Asked Questions