Amortization Calculator

About Amortization Calculator

What Is Amortization?

Amortization is the process of paying off a loan through equal periodic payments. Each payment covers two things: interest on the current balance and a portion of the principal. Because interest is calculated on the remaining balance, early payments are mostly interest and later payments are mostly principal. The word comes from the Latin "amortire" (to kill) - you are gradually killing the debt.

The formula for the fixed monthly payment is:

M = P x r x (1 + r)^n / ((1 + r)^n - 1)

Where P is the principal, r is the monthly interest rate (annual rate / 12), and n is the total number of payments.

How to Read an Amortization Schedule

Worked example: $200,000 mortgage at 6.5% for 30 years. Monthly payment: $1,264.14.

Payment	Principal	Interest	Total Payment	Balance
Month 1	$181	$1,083	$1,264	$199,819
Month 60	$248	$1,016	$1,264	$186,109
Month 120	$340	$924	$1,264	$169,333
Month 180	$466	$798	$1,264	$146,956
Month 240	$638	$626	$1,264	$115,099
Month 300	$875	$389	$1,264	$70,635
Month 360	$1,257	$7	$1,264	$0

Key takeaways from this schedule:

• Month 1: 86% of the payment goes to interest, only 14% to principal
• Month 180 (halfway through): it is still roughly 63% interest, 37% principal
• The crossover point (where principal exceeds interest) does not happen until around month 230 of 360
• Total interest over 30 years: $255,090 - more than the original loan amount
• Total paid: $455,090 for a $200,000 loan

How Extra Payments Save You Money

Extra payments go directly to reducing the principal balance. This has a compounding effect: the lower balance means less interest next month, which means more of your regular payment goes to principal, which further reduces the balance.

Example: $200,000 at 6.5% for 30 years, adding $200/month extra:

	No Extra	+$200/month	Savings
Monthly payment	$1,264	$1,464	-
Payoff time	30 years	21 years, 4 months	8 years, 8 months
Total interest	$255,090	$168,442	$86,648

An extra $200/month saves $86,648 in interest and pays off the loan nearly 9 years early. Every extra dollar has the most impact early in the loan when the balance is highest.

Amortization for Different Loan Types

This calculator works for any fixed-rate amortizing loan. Common uses:

Loan Type	Typical Term	Typical Rate (April 2026)	Notes
Mortgage (30-year)	360 months	6.3 - 6.8%	Most common home loan. Freddie Mac PMMS averaged 6.30% on 16 April 2026.
Mortgage (15-year)	180 months	5.5 - 6.0%	Higher payment, much less interest
Auto loan	48 - 72 months	5.0 - 9.0%	Shorter term, smaller amounts
Personal loan	24 - 60 months	7.0 - 15.0%	Unsecured, higher rates
Student loan (federal)	120 months	5.5 - 8.5%	Standard 10-year repayment

15-Year vs 30-Year Mortgage

The term length dramatically affects both the payment and total cost. Comparison for a $300,000 mortgage at representative rates:

	15-Year at 5.8%	30-Year at 6.5%
Monthly payment	$2,502	$1,896
Total interest	$150,360	$382,636
Total paid	$450,360	$682,636

The 15-year loan costs $606 more per month but saves $232,276 in interest. If you can afford the higher payment, the 15-year term is significantly cheaper overall.

When Does the Principal-Interest Crossover Happen?

The crossover point is when more of each payment goes to principal than interest. It depends on the rate and term:

Loan	Crossover Point	% of Term Elapsed
30-year at 4%	Month 165 (year 14)	46%
30-year at 6%	Month 215 (year 18)	60%
30-year at 8%	Month 252 (year 21)	70%
15-year at 5%	Month 75 (year 6)	42%
5-year auto at 6%	Month 31 (year 3)	52%

At higher interest rates, the crossover comes later, meaning you spend more of the loan's life paying mostly interest. This is one reason extra payments early in the loan have such a large effect.

Tips for Using Your Amortization Schedule

• Track your progress: Compare your actual balance to the schedule each year. If they do not match, check for missed payments or rate changes.
• Plan extra payments strategically: Even occasional lump-sum payments (tax refunds, bonuses) make a noticeable dent in the early years when the balance is high.
• Refinance timing: If rates drop, compare your remaining schedule to a new loan's schedule. Refinancing makes sense when the interest savings exceed the closing costs.
• Copy to a spreadsheet: Click the Copy Table button to paste the full schedule into Excel or Google Sheets for your own tracking and what-if analysis.

What Is Negative Amortization?

Negative amortization happens when your monthly payment does not cover the interest due. The unpaid interest gets added to your principal balance, so you actually owe more over time instead of less. This is the opposite of how a standard loan works.

Negative amortization was common in US "option ARM" mortgages before the 2008 financial crisis. Borrowers could choose a minimum payment that was less than the interest-only amount. The balance grew until it hit a cap (usually 110-125% of the original loan), at which point the payment was forcibly recast to a fully amortizing amount. This "payment shock" caused many defaults.

Today, negative amortization loans are rare in the US (Dodd-Frank Act restricts them), but they still exist in some markets. UK interest-only mortgages are a related concept: you pay only interest each month and repay the full principal at the end of the term. The FCA's latest analysis shows fewer than 1 million outstanding - roughly 750,000 pure interest-only mortgages plus 245,000 part-interest-only mortgages, down from 3.2 million in 2012. The largest maturity peaks fall in 2031 (72,000 loans) and 2032 (77,000). If you have one, make sure you have a repayment plan for the capital (savings, investments, or downsizing).

The Biweekly Payment Strategy

One of the simplest ways to pay off a loan early is to switch from monthly to biweekly payments. Instead of paying $1,264 once a month, you pay $632 every two weeks. Since there are 52 weeks in a year, that gives you 26 half-payments, which equals 13 full payments per year instead of 12.

That one extra payment per year goes entirely to principal. Here is the impact on a $200,000 mortgage at 6.5% for 30 years:

	Monthly (12/year)	Biweekly (26 half-payments/year)	Difference
Payment amount	$1,264/month	$632/every 2 weeks	Same per-payment
Annual total paid	$15,168	$16,432	+$1,264/year
Payoff time	30 years	25 years, 1 month	4 years, 11 months early
Total interest	$255,090	$209,948	$45,142 saved

The biweekly method works because it is painless. Half your monthly payment every two weeks feels the same as your regular budget, but you squeeze in an extra full payment each year without noticing. Many lenders offer biweekly plans directly; if yours does not, you can achieve the same effect by dividing your monthly payment by 12 and adding that amount as an extra principal payment each month.

How Extra Payments Apply to Your Loan

A common misunderstanding: extra payments do not cover next month's bill. If your monthly payment is $1,264 and you send $1,500, the extra $236 goes straight to reducing principal. You still owe the full $1,264 next month.

This is actually a good thing. By reducing the principal now, you reduce the interest that accrues on the next payment. Every dollar of extra principal payment creates a compounding benefit for the remainder of the loan. The earlier in the loan you make extra payments, the bigger the effect because the balance is highest and the most interest is at stake.

When making extra payments, always confirm with your lender that the additional amount is applied to principal, not to future payments. Some lenders will "advance" your due date instead of reducing principal unless you specify. If paying online, look for a field labeled "additional principal" or "extra principal payment".

Refinancing: When the Numbers Make Sense

Refinancing replaces your current loan with a new one at different terms. Use your amortization schedule to decide whether it is worth it:

• Compare remaining interest, not just rates. If you are 10 years into a 30-year mortgage, most of the interest is already paid. Refinancing into a new 30-year term restarts the interest-heavy early years.
• Factor in closing costs. Mortgage refinancing typically costs 2-5% of the loan amount. Divide the closing cost by your monthly savings to get the break-even point. If it takes 4 years to break even but you plan to move in 3, refinancing loses money.
• Rate-and-term vs cash-out. A rate-and-term refinance simply gets you a better rate. A cash-out refinance increases your loan balance. Cash-out refis are tempting for home improvements, but you are converting home equity into debt at a higher rate than the original mortgage.

Use this calculator to generate schedules for both your current loan (remaining balance and term) and the proposed new loan, then compare the total interest remaining on each. A common benchmark: if you can reduce your rate by at least 1 percentage point and plan to stay in the home for 5+ more years, refinancing usually saves money. But always run the numbers for your specific situation rather than following rules of thumb.

For a simpler monthly payment estimate without the full schedule, the loan calculator gives a quick summary. To see how extra payments specifically affect a mortgage, the mortgage overpayment calculator models lump-sum and recurring overpayments. For car-specific features like trade-in and sales tax, use the auto loan calculator. If you are weighing whether to refinance, the refinance calculator factors in closing costs and break-even timing.

All calculations run entirely in your browser. No data is stored or transmitted.

Sources

• Freddie Mac - Primary Mortgage Market Survey (PMMS)
• FRED - 30-Year Fixed Rate Mortgage Average in the United States
• FCA - Interest-only Mortgages Research Note
• FCA - Fewer than 1 Million Interest-Only Mortgages Outstanding
• CFPB - What is Negative Amortization?
• Bankrate - Historical Mortgage Rates