Amortization Calculator

Open the calculator with its starting values and you get the schedule for a $300,000 loan at 6.5% over 30 years. The fixed payment is $1,896 a month. Row one shows where that money goes at the beginning: $1,625 of the first payment is interest and $271 is principal, so after your first month of ownership the balance has dropped to $299,729. You paid nearly $1,900 to owe $271 less. That is not a trick, just the cost of borrowing $300,000, but seeing it in the schedule is what makes the number real. Scroll down and the rows slowly change character. The interest column shrinks as the balance falls, and the principal column grows to match. Principal does not exceed interest within a single payment until payment 233, in year 20, and the balance does not reach the halfway mark of $150,000 until payment 257, in year 22. The bottom row totals it up: 360 payments, $382,633 in interest, $682,633 paid in all. No other view of a loan shows all of this at once, which is why the schedule is worth reading before you sign anything.

One formula sets the payment: M = P x [r(1+r)^n] / [(1+r)^n - 1]. P is the amount borrowed. The letter r is the monthly rate, the annual rate divided by 12, so 6.5% a year becomes 0.0054167 a month. The letter n is the number of payments, 360 for 30 years. The (1+r)^n term describes how the balance would grow if you never paid anything, and dividing by (1+r)^n - 1 spreads that growth into level payments that land the balance at exactly zero on payment n. Once M is fixed, every month resolves in two steps. Interest equals the current balance times r. Whatever is left of M after interest goes to principal. The next month starts from a slightly smaller balance, so the interest charge is slightly smaller and the principal share slightly larger. Repeat 360 times and the loan is gone. Nothing about the split is arbitrary or chosen by the lender. It falls straight out of charging interest on a shrinking balance while holding the payment constant.

The table samples the default schedule at five-year intervals. The payment is $1,896 in every row. Only the split moves. In year one, interest takes about 86% of each payment. The shares do not even out until year 20, and the final payment is almost entirely principal. This is also why selling or refinancing early in a loan often feels disappointing: after five years of payments on this schedule you have retired only about $19,000 of the $300,000 you borrowed.

A dollar of principal removed today stops accruing interest for every month left on the loan, so the earlier it goes in, the more months it works. The default loan makes the point plainly. A one-time $10,000 payment in the first month saves about $53,600 in interest over the life of the loan, more than five times the payment itself. The same $10,000 paid in year 15 saves about $15,600. Paid in year 25, it saves about $3,600. Same money, wildly different results, and the only variable is how many months of interest the reduced balance gets to avoid. Monthly extras follow the same rule. Adding $200 a month from the first payment saves about $103,400 and retires the loan almost seven years early, while starting the same $200 ten years in saves substantially less. Late extra payments still help. They just work fewer months, so if you expect to have money for the loan at some point, sooner beats later by a wide margin.

A refinance does not continue your schedule. It ends it and starts a new one, with your current balance plus any rolled-in closing costs as the new principal, a new rate, and a new term. That new schedule opens the way every schedule opens: heavy on interest. If you are ten years into a 30-year loan, you have already paid through the most interest-heavy stretch and your payments now lean toward principal. Refinance into a fresh 30-year term and you go back to the front of the curve, even at a lower rate, which is how a cheaper rate can still produce a more expensive loan. The check is straightforward. Add up the interest remaining on your current schedule, compare it to the total interest on the proposed loan with its costs included, and look hard at matching the new term to your remaining years instead of resetting the clock. The CFPB's home loan toolkit covers what refinancing costs to close, and the Refinance Calculator on this site runs the comparison directly.