Amortization Calculator
Generate a full month-by-month amortization schedule. See how extra payments save interest and shorten your loan term. See also Loan Calculator and Mortgage Calculator.
How to Use an Amortization Schedule
An amortization schedule shows every payment over the life of a loan, broken down into principal and interest. Each row represents one month, showing how much of your payment reduces the loan balance (principal) and how much goes to the lender as interest. In the early years, most of each payment is interest. Over time, the balance shifts toward principal. Adding extra payments accelerates this process, reducing total interest and shortening the loan term.
Amortization Formula
EMI = P × r × (1 + r)^n / ((1 + r)^n − 1)
Monthly Interest = Remaining Balance × r
Monthly Principal = EMI − Monthly Interest
New Balance = Previous Balance − Monthly Principal − Extra Payment
Where: P = principal, r = monthly rate, n = total months
Example
Loan: $200,000 at 6% for 30 years, Extra: $100/mo
EMI = $1,199.10
Without extra payments:
Total Interest = $231,676.38 over 360 months
With $100/mo extra:
Total Interest = $185,182.80 over 301 months
Savings: $46,493.58 and 59 months (≈5 years)
Extra Payment Impact Table
| Loan | Rate | Extra/mo | Interest Saved | Time Saved |
|---|---|---|---|---|
| $200,000 / 30yr | 6% | $100 | $46,494 | 59 months |
| $200,000 / 30yr | 6% | $200 | $79,511 | 99 months |
| $200,000 / 30yr | 6% | $500 | $131,554 | 172 months |
| $300,000 / 30yr | 7% | $200 | $100,847 | 82 months |
| $300,000 / 30yr | 7% | $500 | $183,920 | 143 months |
| $400,000 / 30yr | 6.5% | $300 | $134,218 | 82 months |
Frequently Asked Questions
What is an amortization schedule?
An amortization schedule is a complete table of periodic loan payments showing the amount of principal and interest that comprise each payment until the loan is paid off. It helps borrowers understand exactly how their money is allocated over the life of the loan.
How do extra payments reduce interest?
Extra payments go directly toward reducing the principal balance. Since interest is calculated on the remaining balance, a lower balance means less interest accrues each month. This creates a compounding effect — each extra payment saves more than its face value in interest over the remaining loan term.
Should I make extra payments or invest the money?
It depends on your loan rate vs expected investment returns. If your loan rate is 6% and you expect 8% investment returns, investing may be better mathematically. However, paying off debt provides a guaranteed "return" equal to your interest rate and reduces financial risk.
When is the best time to make extra payments?
The earlier the better. Extra payments made in the first few years of a loan save the most interest because the balance is highest. A $100 extra payment in year 1 of a 30-year mortgage saves far more than the same payment in year 20.
Solved Examples
Example 1: Amortization schedule for a $200,000 mortgage
Solution:
Loan = $200,000, Rate = 6.5%, Term = 30 years (360 months)
Monthly Rate = 6.5% / 12 = 0.5417%
EMI = 200,000 × 0.005417 × (1.005417)^360 / [(1.005417)^360 − 1] = $1,264.14
Month 1: Interest = $200,000 × 0.005417 = $1,083.33, Principal = $1,264.14 − $1,083.33 = $180.81
Month 2: Interest = $199,819.19 × 0.005417 = $1,082.35, Principal = $181.79
Month 3: Interest = $199,637.40 × 0.005417 = $1,081.37, Principal = $182.77
Year 1 total: Principal paid = $2,223, Interest paid = $12,947
Year 10 total: Principal paid = $4,291, Interest paid = $10,879
Year 30 total: Principal paid = $14,752, Interest paid = $418
Answer: Total paid = $455,090 | Total Interest = $255,090 (128% of principal)
Example 2: Impact of extra $200/month payment on a 30-year loan
Solution:
Loan = $300,000, Rate = 7%, Term = 30 years, EMI = $1,995.91
Without extra payment: 360 months, Total Interest = $418,527
With extra $200/month: Total monthly = $2,195.91
New payoff time ≈ 282 months (23.5 years), saving 78 months
New Total Interest ≈ $316,247
Interest saved = $418,527 − $316,247 = $102,280
Answer: Extra $200/month saves $102,280 in interest and 6.5 years off the loan
Example 3: When does principal exceed interest in monthly payment?
Solution:
Loan = $250,000, Rate = 7.5%, Term = 30 years, EMI = $1,748.04
Month 1: Interest = $1,562.50, Principal = $185.54 (89% goes to interest)
The crossover occurs when: Interest < Principal, i.e., Balance × 0.00625 < $874.02
This happens when Balance < $139,843 — approximately at month 216 (year 18)
For the first 18 years, majority of each payment goes toward interest
Answer: After 18 years (month 216), more of each payment goes to principal than interest
Practice Questions
Try these on your own:
- For a $180,000 loan at 5.5% for 30 years, what is the interest portion of the 1st payment? (Answer: $825.00)
- How much principal is paid in year 1 of a $400,000 loan at 7% for 30 years? (Answer: ≈$5,844)
- After 10 years of a $250,000, 6%, 30-year mortgage, what is the remaining balance? (Answer: ≈$209,803)
- A $150,000 loan at 5% for 15 years: what percentage of total payments is interest? (Answer: Total = $213,576; Interest = $63,576; 29.8%)
- You make one extra payment of $2,000 in year 3 of a $300,000, 6.5%, 30-year loan. How many months does this save? (Answer: ≈4 months)
- What is the outstanding balance after 5 years on a $500,000, 7.25%, 30-year mortgage? (Answer: ≈$471,584)
Common Mistakes to Avoid
Many borrowers don't realize that early in the loan, the vast majority of each payment goes to interest rather than reducing the principal. This means that if you sell your home or refinance within the first 5-7 years, you've barely reduced your loan balance. Another common mistake is not understanding how prepayments work — extra payments should be applied to principal only, not to future payments. Some lenders apply extra payments to the next month's payment instead of reducing principal, which doesn't save you interest. Always confirm with your lender how extra payments are applied. People also commonly confuse the amortization schedule with a simple interest calculation — amortization recalculates the interest each month on the declining balance. Finally, when comparing loans, don't just compare monthly payments; compare the total interest paid over the full term using the amortization schedule.
Key Takeaways
- Amortization means each payment splits into principal and interest — the split ratio changes over time.
- In the first years of a 30-year mortgage, 80-90% of each payment typically goes to interest.
- Extra principal payments early in the loan save far more interest than payments made later.
- A 15-year mortgage pays roughly half the total interest of a 30-year mortgage for the same amount.
- The remaining balance decreases slowly at first (front-loaded interest) then accelerates in later years.
- Use the amortization schedule to plan lump-sum prepayments for maximum interest savings.