What Is a Mortgage Amortization Schedule?
Amortization is the process of paying off a loan with equal periodic payments. Each payment covers the interest accrued on the outstanding balance plus a portion of principal. Early in the loan most of the payment goes to interest; over time the principal share grows until the balance reaches zero. This calculator computes your fixed monthly payment and the total interest you will pay over the life of the loan.
How to Use It
Enter the loan amount (principal), the annual interest rate as a percentage, and the term in years. The calculator converts the annual rate to a monthly rate, multiplies the term by 12 to get the number of payments, and returns your level monthly payment along with total principal, total interest, and total amount paid.
The Formula Explained
The level payment is $$PMT = \frac{P \cdot r}{1 - (1+r)^{-n}}$$ where \(P\) is the principal, \(r\) is the monthly interest rate (annual rate \(\div\) 12 \(\div\) 100), and \(n\) is the total number of monthly payments (years \(\times\) 12). For each period the interest charge equals the balance times \(r\), the principal paid equals PMT minus that interest, and the balance is reduced by the principal portion. Repeating this for \(n\) periods drives the balance to zero.
Worked Example
Borrow $200,000 at 6% for 30 years. The monthly rate is \(0.06/12 = 0.005\) and \(n = 360\). $$PMT = \frac{200000 \cdot 0.005}{1 - 1.005^{-360}} \approx \$1{,}199.10$$ Over 360 payments you pay about $431,676 total, of which roughly $231,676 is interest.
FAQ
Why is so much early payment interest? Interest is charged on the remaining balance, which is largest at the start, so the interest share is highest early on.
Does this include taxes and insurance? No. It calculates principal and interest only. Property tax, insurance, and PMI are additional.
What if the rate is 0%? With no interest, the payment is simply the principal divided by the number of months.
