Loan Amortization Calculator
Calculate loan amortization schedule showing how each payment is split between principal and interest. See how your loan balance decreases over time.
Reviewed by the Calcura editorial team · Last reviewed
- Question
- How does a loan amortization schedule work?
- Answer
- Each month, the interest portion is Interest = Balance × monthly_rate, and the principal portion is the fixed payment minus that interest. The balance goes down by the principal portion; next month's interest is calculated on the new, lower balance. Early in the loan, most of your payment goes to interest; later, most of it goes to principal. Total interest paid over the life of the loan is (monthly_payment × n) − principal.
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- Formula
Interest_m = Balance × r; Principal_m = Payment − Interest_m; Balance -= Principal_m- Caveats
- Assumes a fixed rate. ARM loans recalculate the payment after the fixed period.
- Extra payments go entirely to principal and shorten the schedule dramatically — small extras compound.
- Some loans have interest-only periods or balloon payments that break the standard schedule.
What This Calculator Does
This calculator builds an amortization schedule for a fixed-rate loan. It takes a principal, an annual interest rate, and a term in years, and returns the monthly payment, the principal/interest split in every month, the running balance, and the total interest paid over the life of the loan. Use it whenever you want to see what a lender's quoted payment actually buys — how slowly the balance falls at first, when the split tips from mostly-interest to mostly-principal, and how much extra payments would save.
When To Use This Calculator
Evaluating a New Mortgage Offer
You're offered a $350,000 mortgage at 6.75% for 30 years. Monthly payment: $2,270. Sounds manageable. But the amortization shows you'll pay $467,413 in total interest, and after 5 years of payments ($136,212 paid), your balance has only dropped to $330,116. You've built just $19,884 in equity. Seeing this helps you decide if a 15-year term at a slightly higher payment makes more sense.
Planning Extra Payments
You have $200 extra per month you could throw at your $250,000 mortgage (6%, 30 years). The amortization schedule shows the impact: you'll pay off the loan 5 years and 8 months early and save $62,400 in interest. Better yet, directing that $200 to principal in the early years (when interest charges are highest) maximizes the savings.
Deciding Whether to Refinance
You're 8 years into a 30-year mortgage at 7%. Your remaining balance is $172,000. A new 20-year loan at 5.5% means a slightly higher payment but $48,000 less in total interest. The amortization comparison of both loans side-by-side makes the decision clear.
Tax Planning: Estimating Deductible Interest
You need to project your mortgage interest deduction for tax planning. The amortization schedule shows you'll pay $18,200 in interest this year (year 3 of the loan) but only $14,800 in year 8. This helps your accountant estimate deductions and plan quarterly tax payments.
How It Works
The calculator uses the standard amortization formula to compute your fixed monthly payment, then runs through every single month of the loan to show the principal/interest split. Each month, interest is calculated on the remaining balance (balance × monthly rate). The rest of your payment goes to principal, which reduces the balance. Since the balance shrinks every month, the interest charge shrinks too — meaning more of each subsequent payment goes to principal. This creates the characteristic amortization curve where you build equity slowly at first, then rapidly toward the end. The schedule also reveals the true cost of your loan: total interest paid, which on long-term loans often exceeds the original amount borrowed.
Formula
Monthly Payment = P × [r(1+r)^n] / [(1+r)^n - 1] where P = principal, r = monthly rate, n = total paymentsReal-World Example
Scenario
Sofia buys a home with a $280,000 mortgage at 6.25% for 30 years. She wants to understand the true cost and whether making one extra payment per year would help.
Calculation
Standard loan: Monthly payment: $1,724 Total paid over 30 years: $620,529 Total interest: $340,529 Month 1 breakdown: $1,458 interest + $266 principal Month 180 (year 15): $923 interest + $801 principal Month 360 (final): $9 interest + $1,715 principal With 1 extra payment/year ($1,724 added to principal annually): Loan paid off in ~25 years (5 years early) Total interest saved: ~$58,000
Result
Sofia's monthly payment stays the same at $1,724, but by making one additional payment per year, she saves $58,000 in interest and owns her home free and clear 5 years sooner. The amortization schedule showed her that in the first year alone, she pays $17,400 in interest but only $3,288 goes to principal — a ratio that motivated her to start extra payments immediately when the impact is greatest.
Common Mistakes to Avoid
Mistake: Assuming equal amounts go to principal and interest each month
Solution: On a 30-year loan, your first payment might be 80% interest and only 20% principal. It takes roughly 18-22 years before the split is equal. The amortization schedule reveals this clearly.
Mistake: Not factoring in property taxes and insurance
Solution: Your actual monthly housing cost includes principal, interest, taxes, and insurance (PITI). This calculator shows the P&I portion. Add taxes and insurance separately to budget accurately — they can add $400-$1,000+ per month.
Mistake: Ignoring the impact of interest rate differences
Solution: A 0.5% rate difference on a $300,000 loan changes total interest by $30,000-$35,000 over 30 years. Always compare amortization schedules at different rates before locking in.
Mistake: Making extra payments toward escrow instead of principal
Solution: When making extra payments, specify that the additional amount goes to principal only. If you just send a larger check without instructions, the lender may apply it to escrow or future payments instead of reducing your balance.
Related Financial Calculators
Loan Payment Calculator
Quick monthly payment calculation without the full schedule breakdown. Use this when you just need the payment amount; use Amortization when you want the full picture.
Mortgage Calculator
Comprehensive mortgage calculator including taxes, insurance, and PMI. Gives you the full PITI payment that Amortization doesn't include.
Mortgage Affordability Calculator
Works backwards from your income to tell you how much house you can afford. Use this before running amortization to find your price range.
Credit Card Payoff Calculator
Credit card debt uses different math (revolving balance, variable rates). Use this dedicated tool for credit card payoff planning.
When This Isn't the Right Tool
Adjustable-rate or variable-rate loans
Use instead: ARMs recast the schedule every time the rate adjusts. A fixed-rate schedule from this calculator is only a snapshot at the current rate — run best-case and worst-case rate scenarios to bracket the possible outcomes.
Interest-only and balloon loans
Use instead: These loans don't fully amortize. The principal balance doesn't drop during an interest-only period, and a balloon payment at the end isn't captured by a standard schedule. Work from the lender's specific amortization disclosure.
Loans that compound daily (most credit cards, some auto loans)
Use instead: Standard amortization credits interest once per month against a scheduled balance. Products that accrue interest daily against the actual daily balance produce slightly different splits — use the credit card payoff calculator for credit cards and confirm the interest method on any non-mortgage loan.
Planning extra principal payments with precise payoff date
Use instead: This calculator shows key months but doesn't model month-by-month recasting when extra payments hit. For exact payoff-date math under a recurring extra payment, use a dedicated prepayment calculator or build the schedule in a spreadsheet.
How to Verify This Calculation
In a spreadsheet, =PMT(rate/12, years*12, -principal) gives the same monthly payment, and =IPMT / =PPMT for each month give the same interest/principal split. The lender's Truth in Lending Act disclosure (Loan Estimate for mortgages) should match to the cent at origination. If your own running balance drifts from the lender's statements, confirm whether they're applying extra payments to principal or to future payments.
Sources
- Consumer Financial Protection Bureau — About the Loan Estimate — Official walkthrough of the Loan Estimate form, including the amortization and total-interest disclosures.
- CFPB — Truth in Lending Act (Regulation Z) — Federal rule requiring lenders to disclose finance charges, APR, and payment schedules.
- Federal Reserve — Consumer Handbook on Adjustable-Rate Mortgages — Plain-language reference for how ARM amortization differs from fixed-rate amortization.
Reviewed by the Calcura editorial team · Last reviewed