Loan Amortization Calculator
Calculate your monthly payment and see a complete amortization schedule showing principal and interest breakdown for every payment.
The amortization schedule reveals something most borrowers don't realize until they see it: in the early years of a mortgage, nearly all your payment goes to interest. On a 30-year $280,000 loan at 7%, your first payment of $1,863 contains $1,633 in interest and only $230 in principal. After 5 years of payments, you've paid $111,780 but your balance is only down to about $267,000, $43,780 went to principal, $67,800 went to interest.
Amortization front-loads interest. On a standard 30-year mortgage, over 60% of all interest paid occurs in the first 15 years. Prepaying principal early in the loan has a dramatically larger impact on total interest than prepaying later.
How amortization works
Each payment is fixed, but the split between principal and interest changes every month. The interest portion is the outstanding balance multiplied by the monthly rate (annual rate ÷ 12). The principal portion is the total payment minus the interest. As the balance decreases, the interest portion shrinks and the principal portion grows, slowly at first, then accelerating toward the end of the loan.
The 50% principal milestone
Due to front-loaded interest, it takes more than half the loan term to pay down half the principal. On a 30-year loan, you don't reach 50% principal paid until approximately year 21. This means refinancing or selling before that point results in a relatively small reduction in the principal balance compared to total payments made.
Extra payments and their impact
Extra principal payments early in the loan have outsized impact because they eliminate future interest on that principal. An extra $200/month on a 30-year $280,000 mortgage at 7% saves approximately $80,000 in interest and cuts about 5 years off the payoff timeline. The savings decrease if extra payments are made later in the loan life.
Frequently asked questions
What is negative amortization?
Negative amortization occurs when the required payment is less than the accruing interest, the unpaid interest gets added to the balance. This can happen with certain adjustable-rate mortgages (particularly payment-option ARMs) and some income-driven student loan repayment plans. Negative amortization increases the balance even while making payments, which is generally undesirable.
What's the difference between amortization and depreciation?
Amortization applies to loans (gradual reduction of debt balance) and intangible assets (spreading the cost of intellectual property over its useful life). Depreciation applies to tangible fixed assets (spreading the cost of equipment, buildings, or vehicles over their useful life). Both allocate costs over time, but amortization typically refers to debt repayment in consumer finance contexts.