Amortization Calculator
An amortization calculator builds a complete amortization schedule — a payment-by-payment table showing exactly how each payment splits between principal (reducing the loan balance) and interest (the cost of borrowing). It also shows how the remaining balance changes over time, how much total interest you will pay over the life of the loan, and how much extra payments can save.
What an amortization schedule tells you
- Payment breakdown — exactly how much of each payment goes to interest vs principal for every period in the loan's life
- Remaining balance — how much you still owe after each payment, showing how quickly the debt is actually shrinking
- Cumulative interest — the running total of interest paid to date, useful for tax planning and comparing payoff scenarios
- Effect of extra payments — precisely how many months you save and how much interest you avoid by paying more than the required amount
The Math Behind Amortization
How each payment is split
For each payment period, the interest portion is calculated on the current outstanding balance:
Interest = Remaining Balance × Monthly Rate
The rest of the fixed payment reduces the principal:
Principal = Fixed Payment − Interest
Because the balance drops a little with each payment, the interest portion also drops each month while the principal portion grows. This gradual shift is the amortization curve — and it explains why the early years of a long loan feel like you're barely making a dent in the balance.
A concrete example: 30-year mortgage
On a $200,000 mortgage at 6% APR for 30 years, the fixed monthly payment is approximately $1,199. Here is how the split looks at different points in the loan:
- Payment 1 (month 1): Interest = $1,000 / Principal = $199 / Balance = $199,801
- Payment 180 (year 15): Interest = $710 / Principal = $489 / Balance ≈ $142,000
- Payment 350 (month 350): Interest = $12 / Principal = $1,187 / Balance ≈ $2,400
Total interest over the full 30-year term on this loan is approximately $231,600 — more than the original loan amount. That number is what the amortization schedule makes visible upfront.
How Extra Payments Save Money
Why extra payments are most powerful early
Any extra payment goes entirely to principal, which immediately reduces the balance on which future interest is calculated. Because interest compounds on the remaining balance, cutting that balance early has an outsized effect compared to the same extra payment made later. A dollar paid toward principal in year one saves more total interest than a dollar paid toward principal in year ten — because the year-one dollar eliminates interest charges for every remaining payment in the loan's life.
Example: adding $200/month to a 30-year mortgage
On the same $200,000 mortgage at 6% APR, adding a consistent $200 extra to each monthly payment produces dramatic results:
- Payoff shortens from 30 years to about 22 years
- Total interest saved: approximately $85,000
- Extra cost per month: $200 — about 17% above the required payment
This is one of the most effective wealth-building strategies for homeowners, because the interest saved is guaranteed and certain — unlike investment returns which fluctuate.
Lump-sum vs recurring extra payments
A one-time lump-sum payment — from a tax refund, bonus, or inheritance — applied directly to principal saves a fixed amount of future interest from that point forward. Regular monthly extra payments compound their benefit because each one reduces the base for all subsequent interest calculations. Both strategies work well. Lump-sum payments are ideal for windfalls; regular extra payments build a consistent payoff habit. You can model both approaches in this calculator using the extra payment fields.
Bi-weekly payments
Switching from monthly to accelerated bi-weekly payments — where you pay half the monthly payment every two weeks — effectively makes 13 monthly payments per year instead of 12. That one extra payment per year applied consistently can shorten a 25-year mortgage by 2–4 years and save tens of thousands of dollars in interest with no single large extra contribution.
Negative Amortization
Negative amortization occurs when a loan payment is too small to cover even the interest due for that period. The unpaid interest is added to the principal, causing the balance to grow despite making payments. This can happen with certain adjustable-rate mortgages (ARMs) that have payment caps, graduated payment loans, or income-driven student loan repayment plans where the required payment is capped below the interest accrual rate.
Negative amortization should generally be avoided in consumer borrowing, as it can lead to owing significantly more than the original loan amount over time. This calculator models standard positive amortization where every payment covers at least the interest owed and reduces the principal.
US Mortgage and Loan Notes
Monthly compounding assumption
Most US consumer loans and mortgages compound interest monthly — the annual rate is divided by 12 and applied to the outstanding balance each month. This calculator assumes monthly compounding, which matches the standard for US mortgages, auto loans, and personal loans. For loans with daily interest accrual (common in some HELOCs), the schedule may vary slightly depending on exact payment dates.
Escrow and total monthly payment
Amortization schedules show principal and interest only. Most US mortgages also require monthly escrow deposits for property taxes and homeowner's insurance, and many require PMI (private mortgage insurance) until the loan-to-value ratio reaches 80%. Your actual total monthly housing payment will be higher than the amortization schedule shows — often by $300–$800 per month depending on location and property value.
Prepayment rules
Most US consumer loans allow extra principal payments at any time without penalty. Some older mortgage products and certain specialized loans may include prepayment penalty clauses. Always confirm the prepayment terms in your loan agreement before making extra payments, particularly for mortgages originated before 2014.
Frequently Asked Questions
How do I use this to see interest saved with extra payments?
Enter your loan details and note the total interest shown. Then enter an extra monthly, yearly, or one-time payment amount and observe how both the total interest and payoff date change. The difference between the two totals is exactly how much interest that extra payment strategy saves. Try different extra payment amounts to find the sweet spot that fits your budget.
Why does so much of my early payment go to interest?
Interest is always charged on the outstanding balance, so early in the loan when the balance is at its highest, the interest portion of each payment is at its maximum. As you pay down the balance, the interest portion naturally shrinks and the principal portion grows. This is not a trick or a lender policy — it is the mathematical structure of amortization. It is also why refinancing or making extra payments early in a loan produces the greatest benefit.
What is the difference between the annual and monthly view?
The monthly view shows each individual payment — useful for seeing exactly when the principal and interest split shifts, and for tracking a specific payment date. The annual view summarizes each calendar year — useful for seeing the big picture, comparing year-over -year progress, and for tax planning such as estimating mortgage interest deductions.
Does paying bi-weekly actually save money, or is it a myth?
Accelerated bi-weekly payments genuinely save money — but only if you are making true accelerated payments, not regular bi-weekly. Regular bi-weekly payments (monthly payment ÷ 2 paid 24 times per year) save very little compared to monthly. Accelerated bi-weekly (monthly payment ÷ 2 paid 26 times per year) effectively adds one full extra payment per year, which meaningfully shortens the loan and reduces interest. Confirm which type your lender offers.
Can I use this calculator for a mortgage with taxes and insurance?
This calculator computes principal and interest only. For a full mortgage payment estimate including property taxes, homeowner's insurance, and PMI, use our dedicated Mortgage Calculator. For amortization analysis — understanding how the P&I portion breaks down and modeling extra payments — this calculator is the right tool.
What happens to my amortization schedule if I refinance?
Refinancing restarts the amortization clock with a new loan amount (your current balance, possibly with refinancing costs added), a new rate, and a new term. If you refinance from a 30-year mortgage into another 30-year mortgage 10 years in, you extend the total repayment period even if the new rate is lower. To compare refinancing scenarios, run the remaining balance as a new loan at the new rate and compare total interest to continuing with your current schedule.