Amortization Schedule Calculator

Early mortgage payments are mostly interest, not principal. On a $300,000 mortgage at 6.5%, your first payment includes $1,625 in interest but only $271 toward the actual loan balance. This isn't a scam — it's math. Interest is calculated on the remaining balance, which starts enormous and shrinks slowly.

Amortization spreads loan repayment evenly over time while interest compounds. Your monthly payment stays the same, but the split between interest and principal shifts dramatically. By year 15, half your payment goes to principal. By year 25, most goes to principal. The total interest paid depends more on the rate and term than the payment amount.

This calculator assumes fixed monthly payments and a constant interest rate. Real mortgages may include PMI, property taxes, and insurance in your monthly payment, but these don't affect the loan balance. Prepaying principal directly reduces future interest charges because interest is always calculated on the current remaining balance.

Use this calculator when shopping for mortgage rates to compare total costs, not just monthly payments. A 0.25% rate difference might seem small, but it can cost thousands over 30 years. Calculate payments for different loan amounts to determine how much house you can afford based on your target monthly payment.

Run scenarios before deciding on loan term length. Compare 15-year versus 30-year terms to see the monthly payment difference and total interest savings. The calculator helps you decide whether the higher payment is worth the interest savings for your financial situation.

Use it when considering refinancing to see if a new rate justifies closing costs. Calculate your current loan's remaining payments and compare against a new loan at today's rates. Also helpful for landlords calculating cash flow — mortgage payments are your biggest fixed expense on rental properties.

The biggest mistake is confusing the monthly payment with the total cost. A $1,896 monthly payment on a 30-year loan costs $682,560 total — more than double the original $300,000 borrowed. Many borrowers focus only on monthly affordability and ignore total interest paid over the loan term.

Another common error is not accounting for the full monthly housing cost. Your mortgage payment is just principal and interest. Add property taxes, homeowners insurance, and PMI to get your true monthly housing cost. These can add $300-800 per month depending on location and loan size.

People often underestimate how little principal they pay early on. After five years of payments on a 30-year mortgage, you've typically paid down only 6-8% of the original balance. Most of your payments went to interest. This is why refinancing or selling soon after purchase often means bringing cash to closing rather than walking away with equity.

The monthly payment formula is M = P × [r(1+r)^n] / [(1+r)^n - 1], where P is principal, r is monthly interest rate (annual rate ÷ 12), and n is total payments. For a $300,000 loan at 6.5% over 30 years: monthly rate is 0.065 ÷ 12 = 0.00542, total payments = 360, and the calculation yields $1,896 monthly.

Each month's interest equals the remaining balance times the monthly rate. Month 1 interest: $300,000 × 0.00542 = $1,625. Principal payment: $1,896 - $1,625 = $271. New balance: $299,729. Month 2 interest: $299,729 × 0.00542 = $1,624. The balance drops slowly at first because payments are mostly interest.

The crossover point where principal exceeds interest depends on the rate and term. For 30-year loans, principal overtakes interest around year 18-22. For 15-year loans, it happens around year 6-8. Zero-interest loans have no amortization curve — every payment is pure principal, so monthly payment equals loan amount divided by number of payments.

The standard amortization formula assumes you make payments exactly on time for the full term, but most homeowners refinance within 7 years. Lenders know this and often offer lower rates on 5/1 or 7/1 ARMs because they expect early payoff. The effective rate you pay is usually higher than the quoted rate due to origination fees amortized over your actual holding period, not the full 30-year term.