Amortization Calculator
Visualize loan repayment. See principal vs interest breakdown year-by-year.
Wondering why your loan balance drops so slowly? Use our **Amortization Calculator** to visualize the math behind your payments and discover the "tipping point" where you finally start paying off real debt.
Loan Terms
Monthly Payment
| Year | Principal | Interest | Balance |
|---|
What is Amortization Calculator?
**Amortization** is the strategic repayment schedule that splits your fixed monthly payment between **Interest** (the lender's profit) and **Principal** (your equity).
While your total payment stays the same, the internal split changes every single month. In the early years, banks front-load the interest, meaning most of your money vanishes into profit for the lender. This calculator reveals exactly when the tables turn in your favor.
Financial Education
The "Front-Loaded" Interest Trap
Most borrowers don't realize that a loan is designed to pay the bank first and you last. This isn't accidental; it's the mathematical definition of amortization.
The 80/20 Rule of Early Payments
In Year 1 of a 30-year mortgage at 7%, roughly 83 cents of every dollar you pay goes to interest. Only 17 cents reduces your debt.
The Hidden Opportunity: Because the principal portion is so small initially, even a modest extra payment (like $100/mo) effectively doubles the speed at which you build equity in those early years.
Opportunity Cost: The Price of a Long Term
Extending a loan term lowers your monthly payment, but it drastically increases the total cost of the asset. This is the "Opportunity Cost" of cash flow.
When buying a car, dealers often focus on "Monthly Payment" to distract you from the "Total Interest Paid." By using this calculator to compare a 48-month vs. 72-month auto loan, you can often see that the longer loan costs you an extra $3,000–$5,000—money that could have been invested for your future.
Advanced Strategies
Insider Strategy: The "Round Up" Method
You don't need to make massive extra payments to see results. Simply "rounding up" your payment to the nearest hundred can shave years off your loan.
Formula
The standard amortization formula determines the monthly payment required to pay off the loan fully by the end of the term. The specific principal portion for payment k is calculated as:
Why accuracy matters: Our calculator uses standard 12-period compounding, aligning with 99% of US mortgages and auto loans for precise payoff dates.
Reference Tables
User Scenarios: The Cost of Waiting
Comparison of a $300,000 Loan at 6.5% Interest
| Scenario | Monthly Payment | Total Interest Paid | Debt-Free Date |
|---|---|---|---|
| Case A: 15-Year Term | $2,613 | $170,390 | 15 Years |
| Case B: 30-Year Standard | $1,896 | $382,630 | 30 Years |
| Case C: 30-Year + $200 Extra | $2,096 | $268,400 | 23 Years (7 Years Saved!) |
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Frequently Asked Questions
Common questions about this calculator
What is "Negative Amortization" and should I be worried?
Yes, avoid it. Negative Amortization happens when your monthly payment is too low to even cover the interest due. The unpaid interest gets added to your loan balance. Instead of paying down your debt, your debt actually grows every month. Standard fixed-rate loans do not have this risk.
Does paying twice a month (Bi-weekly) really help?
Yes. By paying half your monthly payment every two weeks, you end up making 26 half-payments a year—which equals 13 full monthly payments. That one extra "accidental" payment per year typically shaves 4-6 years off a 30-year mortgage.
How do I calculate the "Break-Even" point for refinancing?
Divide the Closing Costs by the Monthly Savings. If refinancing costs $4,000 but saves you $200/mo, it will take 20 months ($4,000 ÷ $200) to break even. If you plan to move before month 20, refinancing loses you money.
Why does my principal payment start so low?
Interest is charged on the outstanding balance. At the start, the balance is at its highest (e.g., $300k), so the interest fee is massive. As you slowly chip away at the balance, the interest computation base shrinks, allowing more of your fixed payment to attack the principal.
Is it better to invest or pay off the mortgage early?
It depends on the Interest Rate Arbitrage. If your mortgage rate is 3% and the stock market returns 8%, math suggests investing. However, if your mortgage rate is 7% (a guaranteed "return" by paying it off) and the market is volatile, paying off the debt is often the safer, smarter, tax-free guaranteed return.
Amortization Glossary
Principal
The actual amount of money you borrowed. Paying this down is the only way to build equity and eliminate debt.
LTV (Loan-to-Value)
The ratio of your loan balance to the home's value. Lenders use this to determine risk. Lower LTV gets better rates.
Term
The lifespan of the loan (e.g., 30 years). Longer terms mean lower monthly payments but much higher total interest costs.
Balloon Payment
A large lump-sum payment due at the end of a loan term. Often used in commercial loans or creative financing.
APR vs Interest Rate
Interest Rate is just the cost of borrowing. APR includes the rate plus other fees (points, origination), showing the true cost.
Equity
The "skin in the game" you own. Calculated as: [Current Market Value] minus [Remaining Mortgage Balance].
Why Trust CalculatorsCentral?
Our tools are built by financial technology professionals and verified against banking-grade amortization standards. We use the standard Equivalent Monthly Installment (EMI) formula used by every major US lender, ensuring that what you see here matches your official loan estimate.