Amortization Calculator

About the Amortization Calculator

An amortization schedule shows exactly how each mortgage payment is split between principal and interest, month by month, until the loan is paid off. It's the single most useful document for understanding why early payments feel like you're throwing money away — and why extra principal payments early in the loan are so powerful.

The Formula

Monthly interest = Remaining balance × (Annual rate ÷ 12). Monthly principal = Payment − Interest. New balance = Old balance − Principal. Repeat for every month until balance hits zero.

Worked Example

$300,000 loan at 6.75% for 30 years has a fixed $1,946/month payment. Month 1: interest = $300,000 × 0.005625 = $1,688. Principal paid = $1,946 − $1,688 = $258. Balance now $299,742. By month 180 (halfway), interest portion drops to about $1,250 and principal rises to $696 — the crossover where you finally pay more principal than interest.

Why early payments feel 'wasted'

In year one of a 30-year mortgage, roughly 85% of each payment is pure interest. The lender front-loads their return because the loan balance is highest. This is not unfair — it's the maths of compound interest. But it explains why selling a house after only 3-5 years rarely produces meaningful equity beyond the down payment and price appreciation.

The power of one extra payment per year

Making 13 payments per year instead of 12 cuts a typical 30-year mortgage to roughly 26 years and saves 5-figure totals in interest. The easiest way: split your monthly payment in half and pay bi-weekly. Twenty-six bi-weekly payments equals 13 monthly ones.

Recasting vs prepayment

Prepaying lowers your interest cost and shortens the loan but doesn't lower your monthly payment. Recasting (re-amortizing after a lump-sum principal payment) keeps the same payoff date but lowers your monthly payment — useful if you got a windfall and want lower required cashflow.

Common Mistakes

• Believing the lender 'makes most of their money in the first few years' is some kind of trick. It's just interest on a high balance.
• Sending an extra check without writing 'principal only' on the memo. Some lenders apply it to next month's payment instead.
• Refinancing to a fresh 30-year loan every 5-7 years. You reset the amortization clock to year one, where almost everything goes to interest.

Frequently Asked Questions

When does principal exceed interest in my payment?
Roughly the halfway point of the loan term. On a 30-year mortgage, around year 15.

Can I pay extra anytime?
On a standard US mortgage, yes — there are no prepayment penalties on conventional loans originated after 2014. Always check your loan documents.

This calculator is for informational purposes only and does not constitute financial, tax, or legal advice. Consult a licensed professional before making significant financial decisions.