Amortization Calculator

How to use this calculator#

1. 1
   Enter the balance you owe todayFor a new loan that is the amount advanced. For an existing one, use the current payoff balance and the remaining years — the schedule you get will match your lender's from this point forward, not from the original start date.
2. 2
   Use the note rateAmortization is driven by the contract interest rate, not the APR. Entering the APR spreads closing costs across the schedule and misstates every principal and interest split in the table.
3. 3
   Set the remaining term in whole yearsThe schedule aggregates twelve payments per row. A loan with 27 years and 4 months left is best modelled as 27 years, then read the balance column as slightly conservative.
4. 4
   Find your crossover yearScan down for the first row where the principal column exceeds the interest column. At 6.5% over 30 years that does not happen until year 20 — which tells you exactly how long the lender is earning most of your payment.

The formula#

Reading an amortization schedule#

Every payment splits in two: the interest due that month on the outstanding balance, and whatever remains goes to principal. Because the balance starts high, early payments are overwhelmingly interest. On a 300,000 loan at 6.5% over 30 years, the first payment of roughly 1,896 sends about 1,625 to interest and only 271 to principal — less than a sixth of the money reduces the debt.

The crossover point, where more of each payment goes to principal than to interest, arrives surprisingly late. At 6.5% over 30 years it lands in year 20, month 233 of 360. Shorter terms and lower rates pull it forward dramatically: a 15-year loan at the same rate crosses over in month 53, early in year five, which is a large part of why its total interest is so much smaller.

Why extra principal payments work so hard#

An extra payment applied to principal removes that balance from every future interest calculation, so its benefit compounds. Adding 200 a month to the same 300,000 mortgage clears it in 277 months instead of 360 — nearly seven years early — and cuts total interest from about 382,600 to 279,200, a saving above 103,000. Confirm with your lender that overpayments reduce principal rather than being held as a prepaid instalment, and ask whether early repayment charges apply.

Amortizing versus interest-only debt#

An amortizing loan is engineered to hit a zero balance on the final payment date. Interest-only mortgages, balloon notes and most bridging finance do not amortize at all — the balance sits unchanged until a lump sum falls due, and you need a credible plan to repay it. Laying the two schedules side by side shows exactly why interest-only payments look cheap and cost far more across the full term.

Worked examples#

Reference tables#

Common mistakes#

• Believing you are halfway paid off at the halfway pointAfter 15 years of a 30-year loan at 6.5% you still owe $217,677 of the original $300,000 — 72.6% of the balance. People plan a move or a refinance around a number that does not exist.
• Sending an extra payment without labelling itUnlabelled overpayments are often applied to next month's instalment instead of the principal. That buys you a month off and saves almost nothing. Write 'apply to principal' on the instruction and check the next statement's balance.
• Recasting and re-amortizing without checking the termA recast after a lump sum lowers your payment across the original end date rather than shortening the loan. It improves monthly cash flow and forfeits most of the interest saving you just paid for.
• Assuming the schedule survives a refinanceRefinancing restarts amortization at payment 1. Trading eight years into a 30-year loan for a fresh 30-year term at a slightly lower rate can raise your lifetime interest even though the monthly payment falls.

Frequently asked questions#

Key terms#

Amortization schedule

The full payment-by-payment table showing interest, principal and remaining balance until the loan reaches zero.

Crossover point

The first payment where more goes to principal than to interest. It arrives around 65% of the way through a 30-year loan at 6.5%.

Negative amortization

When the payment is smaller than the interest due, so unpaid interest is capitalised and the balance grows. Possible on some adjustable and income-driven plans.

Recast

Re-running the amortization on a reduced balance while keeping the original end date. Lowers the payment; keeps you in the loan for the full term.

Principal curtailment

An extra payment applied directly to the balance. It removes that amount from every future interest calculation, which is why its effect compounds.

Balloon payment

A large lump sum due at the end of a loan that was never scheduled to fully amortize. Common on commercial and some bridging finance.

Sources#