Amortization Schedule Calculator
Every payment is the same size, but what it buys changes every month. This shows how much of each year goes to interest and how little the balance moves early on.
Monthly payment
$1,896.20per month
- Monthly payment
- $1,896.20
- Total interest
- $382,633.47
- Total repaid
- $682,633.47
- Year 1 interest
- $19,401.27
- Year 2 interest
- $19,176.70
- Year 3 interest
- $18,937.10
- Year 4 interest
- $18,681.44
- Year 5 interest
- $18,408.66
- Balance after year 1
- $296,646.82
- Balance at halfway
- $217,677.42
- Halfway through the term you would still owe $217,677.42 of the original $300,000.00. That is amortization: the early payments are mostly interest.
- Every payment is the same size, but what it buys changes every month. Interest is charged on the balance outstanding, so it falls as the balance does and more of each payment goes to the principal.
- Principal and interest only. Taxes, insurance and any escrow are separate.
About the amortization schedule
Amortization is the arrangement that makes a long loan possible: a fixed payment, the same every month, that clears the debt exactly at the end of the term. What it hides is that the payment is doing something very different in year one than in year twenty-nine.
Interest is charged on the balance outstanding. At the start the balance is the whole loan, so almost the entire payment is interest and barely anything comes off the debt. As the balance falls the interest falls with it, and more of the same payment goes to the principal. The effect accelerates, which is why the last years clear quickly and the first years feel like standing still.
On a thirty-year loan at a typical rate you are still carrying more than four fifths of the original balance after ten years, and more than twenty-one of the thirty years pass before you have repaid half of it. That is not a bad deal or a trick — it is what borrowing money for thirty years costs — but it is worth seeing before you sign, particularly if you expect to move within a few years.
It also explains why overpaying early is worth so much more than overpaying late. A pound off the balance in year two avoids twenty-eight years of interest on that pound; the same pound in year twenty-eight avoids two.
What it works out
- Interest and principal for each of the first five years
- The balance after a year, and at the halfway point
- Total interest over the whole term
- Any loan — mortgage, car, personal or student
The formula
Interest this month = Balance × (Rate ÷ 12) Principal = Payment − Interest
Two lines, applied again every month. The interest is whatever the balance owes for one month at the monthly rate. Whatever is left of the payment comes off the balance. Next month the balance is smaller, so the interest is smaller, so more of the identical payment goes to the principal.
On a $300,000 loan at 6.5%, the first month's interest is $1,625 — the balance times 6.5% divided by twelve. The payment is $1,896.20, so only $271.20 comes off the debt. After a full year of payments the balance has fallen by around $3,350, which is a little over one per cent of what was borrowed.
The payment itself never changes, and that is the whole design. It is set at the outset to be exactly the amount that reduces the balance to zero on the final month, given the rate and the term.
Nothing here compounds against you. Interest is charged once a month on what is outstanding at that moment, and a payment made on time never accrues interest on interest. What makes a long loan expensive is simply the number of months, not any compounding trick.
- Balance
- What is still owed at the start of the month. It falls a little every month.
- Rate
- The annual rate, divided by twelve to get the monthly one.
- Payment
- Fixed for the whole term, set so the balance reaches zero on the last month.
A worked example
A $300,000 mortgage at 6.5% over thirty years.
That works out to $1,896.20 per month.
- Monthly payment
- $1,896.20
- Total interest
- $382,633.47
- Total repaid
- $682,633.47
- Year 1 interest
- $19,401.27
- Year 2 interest
- $19,176.70
- Year 3 interest
- $18,937.10
- Year 4 interest
- $18,681.44
- Year 5 interest
- $18,408.66
- Balance after year 1
- $296,646.82
- Balance at halfway
- $217,677.42
Questions
What does amortization mean?
Repaying a debt through fixed regular payments that cover the interest and gradually clear the balance. The payment stays the same; the split between interest and principal inside it changes every month.
Why is so much of my early payment interest?
Because interest is charged on the balance outstanding, and at the start the balance is the entire loan. On a $300,000 mortgage at 6.5%, the first month is $1,625 of interest and only $271 of principal out of a $1,896 payment.
When do I start paying more principal than interest?
On a thirty-year loan at typical rates, somewhere around year nineteen or twenty. The higher the rate, the later the crossover — at a very low rate it can happen in the first few years.
How much do I still owe halfway through the term?
Far more than half. On a thirty-year loan at 6.5%, after fifteen years you still owe just under three quarters of the original balance. Repaying half the money takes about twenty-one and a half of the thirty years.
Does overpaying early really matter more?
A great deal more. Money taken off the balance in year two avoids twenty-eight years of interest on that amount; the same money in year twenty-eight avoids two. It is the same payment with very different effects.
Is the interest compounded?
Not against you, if you pay on time. Interest is charged monthly on the outstanding balance and the payment clears it, so no interest is ever charged on interest. What makes a long loan expensive is the number of months, not compounding.
Why is my actual statement slightly different?
Lenders vary in how they count days. Some charge a true monthly twelfth, others use actual days in the month or a 360-day year, and the payment date within the month shifts things by a few pounds either way. The shape is identical; the pennies are not.
Does this include taxes and insurance?
No — principal and interest only. Property taxes, insurance and any service charge are collected alongside the payment but are not part of the loan, and they change over time while the payment does not.