Amortization Calculator

What is an amortization schedule?

An amortization schedule shows how a loan balance changes as you make payments. This amortization calculator estimates your payment and lays out the schedule monthly or yearly, so you can see how much goes to interest and how much reduces principal.

The calculation follows a simple pattern: each payment covers that month’s interest, calculated as the balance multiplied by the rate divided by 12. The rest of the payment reduces the principal. As the balance falls, the interest charged on it also falls, so more of a payment can go toward principal over time.

Why an amortization schedule matters

A monthly payment alone does not show the full cost of borrowing. The schedule helps you see the total interest over the loan and when the balance is expected to reach zero. That can help you compare loan offers, decide how much to borrow, or judge whether a shorter term fits your budget.

It also makes extra payments easier to evaluate. Paying extra toward principal can reduce the balance sooner, which can lower future interest and bring the payoff date forward. Before you send extra money, check how your lender applies it. Confirm that it reduces principal rather than being held for a future payment, and review whether your loan has any conditions that affect early repayment.

Use the estimate as one part of your borrowing decision. A mortgage payment is not always the same as your full housing cost, which may also include taxes, insurance, mortgage insurance or fees. Compare lender documents, including the Loan Estimate explainer from the CFPB, to understand costs that this schedule may not show.

How to use this amortization calculator

1. Enter the loan amount you expect to borrow. Use the principal balance, not the home price or another amount that includes costs outside the loan.
2. Enter the annual interest rate and the loan term in years. Use the rate and term from the loan offer you want to assess.
3. Enter any extra monthly principal you plan to pay. Leave it at zero to see the schedule without extra payments.
4. Choose a monthly or yearly schedule. Monthly detail shows the payment progression more closely; yearly view gives you a broader summary.
5. Review the monthly payment, total interest and payoff estimate. Change one input at a time to compare borrowing choices on the same basis.

Amortization calculator example

How to read your amortization results

The monthly payment is the estimated regular loan payment based on the amount, rate and term you entered. Check your lender’s documents to see whether that figure includes only principal and interest or other charges as well.

Total interest estimates the borrowing cost over the schedule. It is separate from the loan amount: principal is the money borrowed, while interest is the cost charged for borrowing it. The payoff estimate shows when the schedule expects the balance to be cleared if you make the modeled payments and the rate and payment assumptions hold.

How to improve your loan payoff

1. 01

   Compare a shorter term

   Run the same loan amount and rate with a shorter term, then compare the payment and total interest. A shorter term can mean a higher required payment, so check that it leaves room in your monthly budget.

2. 02

   Test an extra principal payment

   Enter an extra monthly amount you could sustain, then review how the payoff estimate and total interest change. Confirm with your servicer how to direct the extra money to principal.

3. 03

   Compare loan offers consistently

   Use the same loan amount and term when comparing rates. Review fees and other costs in the lender’s documents too, because a payment schedule does not capture every cost of getting a loan.

4. 04

   Revisit the plan when your budget changes

   If your income or expenses change, test whether your planned extra payment still fits. Avoid committing money you may need for essential bills or other financial obligations.

Common amortization calculator mistakes

• Entering the home price instead of the loan amount

  The amount financed may differ from the purchase price. Enter the balance you expect to borrow so the payment and interest estimate match the loan you are evaluating.

• Treating the estimate as a complete housing payment

  The calculator’s loan payment does not necessarily include property taxes, insurance, mortgage insurance or lender fees. Check your loan documents and budget for those costs separately.

• Assuming an extra payment automatically reduces principal

  Lenders may process extra money in different ways. Ask how to designate an additional payment for principal and check your statement to confirm the balance changed as expected.

• Comparing schedules with different inputs

  If the loan amount, rate or term changes between comparisons, the results do not isolate the effect of the change you meant to test. Keep other inputs the same when comparing.

The amortization schedule formula

Key terms

Amortization

The process of paying down a loan through scheduled payments that cover interest and reduce principal.

Amortization schedule

A month-by-month or year-by-year breakdown of payments, interest, principal reduction and remaining balance.

Principal

The amount borrowed, or the remaining loan balance before interest is added.

Total interest

The estimated amount charged for borrowing over the schedule, based on the inputs provided.