Amortization

1. Enter the **loan amount (principal)** – the total amount you are borrowing, not including any down payment.
2. Enter the **annual interest rate** as a percentage (e.g., 6.5 for 6.5%). The calculator converts this to a monthly rate automatically.
3. Enter the **loan term** in years (e.g., 30 for a 30-year mortgage or 5 for a 60-month auto loan).
4. Click **Calculate** to see your fixed monthly payment, total interest paid over the life of the loan, and the full amortization schedule table.
5. Scroll through the **amortization table** to see how each payment is split between interest and principal, and how your remaining balance decreases each month.
6. Optionally, adjust any input and recalculate to compare scenarios – for example, a 15-year vs. 30-year term, or different interest rates.

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

• M — The fixed periodic payment amount (e.g., monthly payment in dollars).
• P — The principal loan amount – the original amount borrowed.
• r — The periodic interest rate = Annual Interest Rate ÷ 12 (for monthly payments). For example, a 6% annual rate gives r = 0.06 / 12 = 0.005.
• n — Total number of payment periods = Loan term in years × 12 (for monthly payments). A 30-year loan gives n = 360.
• (1 + r)^n — The compound growth factor, representing how much $1 grows over n periods at rate r.

M = 200,000 × [0.005 × (1.005)^360] / [(1.005)^360 − 1]
(1.005)^360 = 6.02258
Numerator: 0.005 × 6.02258 = 0.030113
Denominator: 6.02258 − 1 = 5.02258
M = 200,000 × (0.030113 / 5.02258) = 200,000 × 0.005996 = $1,199.10

Payment 1 breakdown:
  Interest = $200,000 × 0.005 = $1,000.00
  Principal = $1,199.10 − $1,000.00 = $199.10
  Remaining balance = $200,000 − $199.10 = $199,800.90

Total paid over 30 years = $1,199.10 × 360 = $431,676
Total interest paid = $431,676 − $200,000 = $231,676

Result: Monthly payment: **$1,199.10** | Total interest over 30 years: **$231,676** | Total amount paid: **$431,676**

The calculator produces two key outputs:

1. Monthly Payment (M): The fixed amount due each month — in this example, $1,199.10. This never changes for a fixed-rate loan.
2. Amortization Schedule: A row-by-row table for all 360 payments showing the interest portion, principal portion, and remaining balance. Early payments are heavily interest-weighted (Payment 1 is 83% interest), while later payments are mostly principal. This shift is called negative amortization in reverse — your equity grows slowly at first, then accelerates.

Note: Results are estimates based on a fixed interest rate and do not account for property taxes, homeowners insurance, PMI, prepayment penalties, or variable-rate adjustments. Actual totals may differ from your lender's figures due to rounding conventions and loan origination details.

Understanding Loan Amortization

What Is Amortization?

Amortization comes from the Old French amortir ("to kill"). In finance, it refers to the gradual elimination of a debt through regular scheduled payments. Every amortizing loan — mortgage, auto loan, student loan, personal loan — follows the same mathematical principle: each payment covers the interest due for that period, and anything left over reduces the outstanding principal.

Why Does Interest Dominate Early Payments?

Because interest is calculated on the remaining balance, and the balance is highest at the start, the interest charge is largest in month 1. As you pay down principal, the interest charge shrinks, and more of your fixed payment chips away at the debt. Over a 30-year mortgage, you may pay nearly 65% of your total payments as interest.

The Power of Extra Payments

Making even small additional principal payments early in the loan term has a disproportionate impact because it reduces the balance on which future interest is calculated. For example, paying an extra $100/month on the $200,000 example above shortens the loan by approximately 5 years and saves over $40,000 in interest.

Fixed-Rate vs. Adjustable-Rate Amortization

This calculator assumes a fixed interest rate. Adjustable-rate mortgages (ARMs) recalculate the payment at each adjustment period using the remaining balance as the new principal and the new rate — meaning the schedule changes over time.

Amortization vs. Simple Interest Loans

Most consumer loans are amortizing (compound interest on balance). Some short-term personal loans use simple interest, where interest does not compound. The amortization formula above applies to standard amortizing loans only.

Key Terms

• Principal: The original loan balance.
• Interest: The cost of borrowing, expressed as a rate applied to the outstanding balance.
• Amortization Period: Total time to pay off the loan.
• Equity: The portion of the asset you truly own = Asset value minus remaining loan balance.

• **Using the annual rate directly instead of the monthly rate.** The formula requires r = Annual Rate ÷ 12. Using 6% instead of 0.5% per month will produce a wildly incorrect payment.
• **Confusing loan term with amortization period.** Some mortgages have a 5-year term with a 25-year amortization — a balloon payment is due at term end. This calculator assumes full amortization over the entered term.
• **Forgetting that the first payment does not reduce the balance by the full payment amount.** Almost all of the early payments go to interest, so your balance drops much more slowly than you might expect.
• **Not accounting for additional costs.** The amortization payment covers only principal and interest (P&I). Your actual monthly housing cost includes property taxes, insurance, and possibly PMI — often 25–40% more than the P&I payment.
• **Assuming bi-weekly payments simply halve the monthly payment.** Bi-weekly payment schedules result in 26 half-payments (13 full payments) per year instead of 12, meaningfully shortening the loan term and reducing total interest.
• **Ignoring the impact of the loan start date on the first payment amount.** If a loan closes mid-month, the first payment may include prepaid interest for the partial month, making it slightly higher than subsequent payments.

• Consumer Financial Protection Bureau – How to Use an Amortization Calculator — Consumer Financial Protection Bureau (CFPB)
• Mortgage Servicing Rules – Regulation Z (Truth in Lending) — U.S. Consumer Financial Protection Bureau / eCFR
• Federal Reserve – Consumer's Guide to Mortgage Refinancings — Board of Governors of the Federal Reserve System
• Investopedia – Amortization (definition and formula) — Investopedia (Dotdash Meredith)

Only sources that have been reviewed are shown. Unverified citations are never published.