Amortization Calculator

Amortization is the process of paying off a loan through regular, equal payments over a set period. Each payment is split between interest (the cost of borrowing) and principal (reducing what you owe). The defining characteristic of amortization is that the split changes over time: early payments are mostly interest, while later payments are mostly principal. This is not a trick or a design flaw. It is a mathematical consequence of charging interest on a declining balance. When $300,000 is owed, 6.5% annual interest generates $1,625/month. When $100,000 is owed, the same rate generates only $542/month. Since the total payment stays the same, the principal portion naturally grows as the interest portion shrinks. Understanding this pattern is valuable because it reveals when extra payments have the most impact and helps you calculate the true cost of different loan terms.

An amortization schedule is a roadmap of your entire loan. The first row shows payment number one, with the highest interest portion and lowest principal portion. The last row shows the final payment, with the lowest interest and highest principal. Between those bookends, you can track your progress at any point. Key milestones to watch: the "crossover point" where principal exceeds interest in each payment (roughly 60-70% of the way through a 30-year loan), the halfway point where half the original principal is repaid (much later than the halfway payment because early payments are interest-heavy), and the point where your cumulative interest paid exceeds the original loan amount (this happens on 30-year loans at rates above about 6%). Printing or bookmarking your schedule helps you stay motivated by visualizing the principal balance declining over time.

Extra payments have an outsized impact when made early in the loan because they prevent interest from accumulating on that money for the remaining decades. Consider a $300,000 loan at 6.5% over 30 years. A one-time extra payment of $10,000 in month 1 saves approximately $31,000 in total interest. The same $10,000 extra payment in year 15 saves about $10,000 in interest. In year 25, it saves only about $3,000. The reason is time: the year-1 payment has 29 years to generate compound savings, while the year-25 payment has only 5 years. This does not mean late extra payments are worthless, just that earlier is better. For regular monthly extra payments, the effect is dramatic: $200/month extra from the start saves $104,000 on this loan. Starting those same $200/month extra payments in year 10 saves about $55,000.

The 15-year and 30-year terms represent the two most common mortgage options, and their amortization patterns differ significantly. On a $300,000 loan at 6.5%, the 30-year schedule shows $382,633 in total interest with a monthly payment of $1,896. The 15-year schedule shows $170,456 in total interest with a monthly payment of $2,614. The 15-year option saves $212,177 in interest, and 15-year rates are typically 0.25-0.75% lower than 30-year rates, amplifying the savings further. The tradeoff is $718/month in higher payments. The 15-year schedule reaches the principal/interest crossover point much faster (around year 5 instead of year 18) and builds equity at roughly double the rate. For borrowers who can afford the higher payment, the 15-year term is almost always the better financial choice. For those who cannot, taking a 30-year term and making extra payments when possible provides flexibility with some of the interest savings.

When evaluating a refinance, the amortization schedule reveals costs that a simple rate comparison misses. Refinancing resets the amortization clock. If you are 10 years into a 30-year mortgage, you have already paid the most interest-heavy payments. Your remaining schedule is increasingly principal-heavy. Refinancing into a new 30-year term starts you back at the interest-heavy beginning, even at a lower rate. To determine whether refinancing saves money, compare the total remaining interest on your current loan (visible in your amortization schedule) to the total interest on the proposed new loan. If you refinance $250,000 remaining balance from 7% to 5.5% into a new 30-year term, your monthly payment drops by $318, but the total interest on the new loan is $261,000 versus $199,000 remaining on the current loan. Choosing a 20-year refinance term instead would save both monthly and in total. Always run the numbers rather than assuming a lower rate means lower total cost.