🏠 Mortgage Amortization Calculator
Calculate mortgage payment schedule
How to Use This Calculator
Enter Loan Details
Input your loan amount, annual interest rate, and loan term in years. Optionally enter a start date and extra monthly payment amount.
Calculate Amortization Schedule
Click calculate to generate your complete amortization schedule showing how each payment is allocated between principal and interest.
Review Payment Schedule
Review the amortization schedule to see how your loan balance decreases over time and how extra payments affect your payoff timeline.
Formula
Monthly Payment = P × [r(1+r)^n] / [(1+r)^n - 1]
Where: P = Principal, r = Monthly Rate, n = Number of Payments
Interest Payment = Remaining Balance × Monthly Rate
Principal Payment = Monthly Payment - Interest Payment
Example: $300,000 Loan at 5% for 30 Years
Monthly Payment: $1,610.46
Month 1: Interest = $1,250.00, Principal = $360.46, Balance = $299,639.54
Month 2: Interest = $1,248.50, Principal = $361.96, Balance = $299,277.58
Month 360: Interest = $6.70, Principal = $1,603.76, Balance = $0
Notice how interest decreases and principal increases over time.
About Mortgage Amortization Calculator
The Mortgage Amortization Calculator is an essential tool for homeowners and homebuyers to understand how their mortgage payments are structured over the life of the loan. An amortization schedule shows the breakdown of each payment, illustrating how much goes toward principal (reducing your loan balance) versus interest (the cost of borrowing). This calculator provides a complete payment-by-payment breakdown, helping you understand the true cost of your mortgage and how your loan balance decreases over time.
Understanding mortgage amortization is crucial because it reveals an important truth about how mortgages work: in the early years of your loan, most of your payment goes toward interest, with only a small portion reducing your principal balance. As time passes, this ratio shifts, and more of each payment goes toward principal. This calculator shows this progression clearly, helping you understand why it takes so long to build equity and why extra payments early in the loan term can have such a significant impact.
This calculator also allows you to see the impact of extra payments on your amortization schedule. By making additional principal payments, you can reduce your loan balance faster, pay less total interest, and shorten your loan term. The calculator shows exactly how extra payments affect your schedule, helping you make informed decisions about whether to accelerate your mortgage payoff or invest your money elsewhere.
When to Use This Calculator
- Payment Understanding: See how each payment is allocated between principal and interest
- Equity Tracking: Understand how your loan balance decreases over time
- Extra Payment Planning: See the impact of extra payments on your loan payoff
- Refinance Analysis: Compare current loan structure to potential refinance options
- Tax Planning: Understand interest payments for tax deduction purposes
- Loan Comparison: Compare different loan terms and their amortization schedules
Why Use Our Calculator?
- ✅ Complete Schedule: See payment-by-payment breakdown
- ✅ Extra Payment Analysis: Understand impact of additional payments
- ✅ Accurate Calculations: Precise amortization formulas
- ✅ Free Tool: No registration or fees required
- ✅ Educational: Learn how mortgage amortization works
- ✅ Mobile Friendly: Calculate on any device
Understanding Mortgage Amortization
Mortgage amortization is the process of paying off a loan through regular payments over time. Each payment consists of two parts: interest (the cost of borrowing) and principal (the actual loan amount). In the early years, interest makes up a larger portion of each payment because the outstanding balance is high. As you pay down the principal, the interest portion decreases, and more of each payment goes toward reducing the loan balance.
This is why it takes so long to build equity in the early years of a mortgage. On a 30-year loan, it can take 10-15 years before you've paid down a significant portion of the principal. This is also why extra payments early in the loan term are so valuable - they reduce the principal balance when it's highest, saving the most interest over time.
Real-World Applications
Understanding Payment Allocation: A homeowner with a $300,000 loan at 5% sees that in month 1, $1,250 goes to interest and only $360 goes to principal. By month 120 (year 10), $833 goes to interest and $777 goes to principal. This shows why equity builds slowly initially.
Extra Payment Impact: The same homeowner makes an extra $200 payment each month. The amortization schedule shows the loan pays off 5 years earlier and saves $50,000 in interest, demonstrating the power of extra payments.
Tax Planning: A homeowner uses the amortization schedule to track interest payments for tax deductions. In the first year, they can deduct approximately $14,900 in mortgage interest, which decreases each year as the principal balance decreases.
Important Considerations
- Early payments are mostly interest; principal reduction accelerates over time
- Extra payments have the greatest impact when made early in the loan term
- Amortization schedules assume consistent payments; actual schedules may vary
- Interest payments are typically tax-deductible (consult a tax professional)
- This calculator shows principal and interest only; add taxes and insurance for complete payment
- Review your actual loan statements to verify payment allocation
Frequently Asked Questions
What is mortgage amortization?
Mortgage amortization is the process of paying off a loan through regular payments over time. Each payment is split between interest (the cost of borrowing) and principal (the loan amount). Early payments are mostly interest, while later payments are mostly principal.
Why do early payments go mostly to interest?
Early payments go mostly to interest because the outstanding loan balance is highest at the beginning of the loan. Interest is calculated on the remaining balance, so when the balance is high, the interest portion is large. As you pay down principal, the balance decreases, and less interest accrues each month.
How do extra payments affect amortization?
Extra payments applied to principal reduce your loan balance immediately, which means less interest accrues each month going forward. This creates a compounding effect where each extra payment becomes more effective, reducing your total interest paid and shortening your loan term.
Can I see how much interest I'll pay over the life of the loan?
Yes, the amortization schedule shows the total interest paid over the life of the loan. You can see how much interest you pay each month and the cumulative total. This helps you understand the true cost of borrowing and the value of making extra payments.
How is the amortization schedule calculated?
The schedule is calculated using the standard mortgage payment formula. Each month, interest is calculated on the remaining balance, and the principal payment is the monthly payment minus the interest. The remaining balance decreases by the principal payment amount, and the process repeats for each payment.
Why is my equity building so slowly?
Equity builds slowly in the early years because most of your payment goes toward interest rather than principal. On a 30-year loan, it can take 10-15 years to pay down a significant portion of the principal. This is why extra payments early in the loan term are so valuable - they accelerate equity building.