Loan Details
Understanding Loan Amortization
What is Amortization?
Amortization is the process of paying off a loan through regular payments over time. Each payment covers both principal (the amount borrowed) and interest (the cost of borrowing). Early payments go mostly toward interest, while later payments go mostly toward principal.
The Amortization Formula
Monthly payment is calculated using:
M = P × [r(1+r)ⁿ] / [(1+r)ⁿ - 1]
Where:
- M = Monthly payment
- P = Principal (loan amount)
- r = Monthly interest rate (annual rate ÷ 12)
- n = Total number of payments
Benefits of Extra Payments
Making extra payments toward principal can significantly reduce your total interest and shorten your loan term. Even small additional payments add up over time:
- A $100 extra monthly payment on a $250,000 mortgage at 6.5% saves ~$58,000 in interest
- One extra payment per year can cut years off your mortgage
- Extra payments early in the loan have the biggest impact
Tips for Using This Calculator
- Compare different loan terms to see how they affect total interest
- Use the extra payment field to see potential savings
- Export the schedule to track your actual payments
- Review the chart to understand how your balance decreases over time
Privacy & Limitations
- All calculations run entirely in your browser -- nothing is sent to any server.
- Results are estimates and may vary based on actual conditions.
Related Tools
- Loan Calculator -- Calculate monthly payments and total interest
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This tool FAQ
What is an amortization calculator?
An amortization calculator generates a full loan payment schedule showing how each monthly payment splits between principal and interest. It calculates your fixed monthly payment, total interest paid, and payoff date based on the loan amount, interest rate, and term.
How is the monthly payment calculated?
The monthly payment uses the standard amortization formula: M = P × [r(1+r)^n] / [(1+r)^n - 1], where P is the principal, r is the monthly interest rate (annual rate divided by 12), and n is the total number of payments. For example, a $250,000 loan at 6.5% for 30 years gives a monthly payment of $1,580.17.
What is the difference between amortization and simple interest?
With amortization, each payment covers both principal and interest, and the interest portion decreases over time as the balance shrinks. With simple interest, interest is calculated only on the original principal. Most mortgages and auto loans use amortization. Simple interest is more common for short-term personal loans.
Why do early loan payments go mostly toward interest?
Interest is calculated on the remaining balance each month. At the start of a loan, the balance is highest, so the interest charge is largest. As you pay down the principal, the interest portion shrinks and more of each payment goes toward principal. On a 30-year $250,000 mortgage at 6.5%, the first payment puts $1,354 toward interest and only $226 toward principal.
How much can extra payments save on a mortgage?
Extra payments reduce the principal faster, which cuts total interest. For a $250,000 mortgage at 6.5% over 30 years, adding $100/month saves roughly $58,000 in interest and shortens the loan by about 5 years. Adding $200/month saves roughly $95,000 and shortens it by about 8 years.
Should I choose a 15-year or 30-year mortgage?
A 15-year mortgage has higher monthly payments but lower total interest and typically a lower rate. A 30-year mortgage has lower monthly payments but costs more over time. On a $250,000 loan at 6.5%, the 30-year payment is $1,580/month with $318,861 total interest, while a 15-year at 6.0% is $2,110/month with $129,756 total interest.
Does this calculator include taxes and insurance?
No. This calculator computes principal and interest only. Your actual monthly housing payment (PITI) also includes property taxes, homeowner's insurance, and possibly private mortgage insurance (PMI). Add those costs separately to estimate your true monthly obligation.
Can I export the amortization schedule?
Yes. Click the Export CSV button above the schedule table to download a spreadsheet-compatible file with every payment row, including payment number, date, payment amount, principal, interest, and remaining balance.
Does this calculator store my data?
No. All calculations run entirely in your browser. No data is sent to any server, no cookies are set, and refreshing the page clears all inputs.