Amortization Calculator
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What Your Result Means
- Monthly Payment: The fixed amount due each month, covering both principal and interest. This stays constant for fixed-rate loans (before any extra payment).
- Total Interest: The cumulative cost of borrowing over the life of the loan. On longer terms this often exceeds the original loan amount.
- Total Paid: Principal plus total interest — the full out-of-pocket cost if you make every scheduled payment.
- Payoff Date: The estimated month and year when the balance reaches zero, accounting for any extra payments you specified.
- Year-by-Year Schedule: Shows how much of each year's payments goes to principal vs. interest, and the remaining balance. Early years are interest-heavy; later years shift toward principal.
How This Calculator Works
You enter the loan amount, annual interest rate, term in years, and an optional extra monthly payment. The tool applies the standard fully-amortizing PMT formula with monthly compounding to determine the base payment, then simulates month-by-month payoff — applying each extra payment directly to principal. It assumes a fixed rate, no fees, no escrow, and no prepayment penalties.
Quick Questions
How does an extra payment reduce total interest?
Extra payments go directly to principal, shrinking the balance faster. Since interest is calculated on the remaining balance each month, a smaller balance means less interest accrues. Even modest extra payments can cut years off a loan and save thousands in interest.
What is the difference between amortization and simple interest?
An amortizing loan has a fixed payment split between principal and interest, with the interest share declining over time. Simple interest charges interest only on the original principal. Most mortgages and auto loans use amortization.
Why is most of my early payment going to interest?
Interest is calculated on the outstanding balance. When the balance is high (early in the loan), the interest portion is large. As you pay down principal, more of each payment shifts to principal reduction — this crossover typically happens past the midpoint of the term.
Does this include taxes and insurance?
No. This calculator shows principal and interest only. Mortgage escrow typically adds property taxes, homeowners insurance, and PMI (if applicable) to your actual monthly payment from the lender.
Can I use this for car loans or student loans?
Yes — the amortization formula is the same for any fixed-rate installment loan. Enter the loan amount, rate, and term for any loan type to see the payment schedule and interest breakdown.
Sources
- CFPB — What Is Amortization? (amortization basics and how payments are applied)
- Federal Reserve — Consumer Handbook on Adjustable-Rate Mortgages (fixed vs. adjustable rate context)
- SEC — How Fees and Expenses Affect Your Investment Portfolio (understanding cost of borrowing)
Method & review
Estimate only. Results reflect your inputs and standard formulas — they are not financial, tax, legal, health, or investment advice. Verify important decisions with a qualified professional.