Amortization Calculator
View your complete loan amortization schedule with monthly payment breakdown, interest savings from extra payments, and a visual chart of principal vs. interest over time.
How Loan Amortization Works
Amortization is the process of spreading a loan into a series of fixed payments over time. Each payment covers both interest on the remaining balance and a portion of the principal. The word comes from the Latin "amortire," meaning to kill — you are gradually killing the debt with each payment.
The Amortization Formula
Your monthly payment is calculated using the formula: M = P[r(1+r)^n] / [(1+r)^n - 1], where P is the loan principal, r is the monthly interest rate (annual rate divided by 12), and n is the total number of payments (years multiplied by 12). This formula ensures that every payment is the same amount while properly allocating between principal and interest.
Why Interest Is Front-Loaded
In the early months of a loan, the outstanding balance is at its highest, so the interest portion of each payment is large and the principal portion is small. For a $300,000 loan at 6.5% over 30 years, the first monthly payment of $1,896 contains about $1,625 in interest and only $271 in principal. By year 15, the split is roughly even. In the final years, nearly the entire payment goes toward principal. This front-loading is why extra payments early in the loan term have a disproportionately large impact on total interest saved.
The Power of Extra Payments
Making additional payments beyond the required amount reduces your principal faster, which in turn reduces the interest charged in subsequent months. Even modest extra payments can yield significant savings. On a 30-year $300,000 mortgage at 6.5%, paying an extra $200 per month saves over $90,000 in interest and pays off the loan nearly 7 years early. Always confirm with your lender that extra payments are applied to principal, not held as advance payments.
Reading the Amortization Schedule
The schedule table below shows every month of your loan. Use it to see exactly when your principal and interest portions cross over, how your balance decreases over time, and the cumulative effect of extra payments. This transparency helps you make informed decisions about refinancing, extra payments, or comparing loan options.
Frequently Asked Questions
What is an amortization schedule?
An amortization schedule is a complete table of periodic loan payments showing the amount of principal and interest that make up each payment until the loan is paid off. Early in the schedule, the majority of each payment goes toward interest. Over time, more of each payment is applied to principal. The schedule helps you understand exactly how your loan will be repaid month by month.
How do extra payments affect my mortgage?
Extra monthly payments go directly toward reducing your loan principal, which means you pay less interest over the life of the loan and pay it off sooner. For example, adding just $100/month to a $300,000 loan at 6.5% can save you over $50,000 in interest and cut nearly 5 years off your loan term. The earlier you start making extra payments, the greater the impact.
Why does most of my payment go to interest at first?
Interest is calculated on your remaining balance each month. Since the balance is highest at the beginning, the interest charge is also highest. As you make payments and reduce the principal, less interest accrues each month, so more of your fixed payment goes toward principal. This is called front-loaded interest and is a fundamental feature of amortized loans.
Is it better to make extra payments or invest the money?
It depends on your interest rate and potential investment returns. If your mortgage rate is 6-7%, making extra payments guarantees that return by avoiding interest charges. If your rate is lower (3-4%), you may earn more by investing in index funds historically averaging 7-10%. Consider your risk tolerance, tax situation, and the psychological value of being debt-free sooner.