How it works
With an amortizing loan, every payment is the same, but early payments are mostly interest. As the balance falls, more of each payment goes to principal.
Formula
M = P × r ÷ (1 − (1 + r)⁻ⁿ) Balanceₖ = P(1 + r)ᵏ − M((1 + r)ᵏ − 1) ÷ r
Example
$250,000 at 6.5% for 30 years: $1,580.17/month; the first payment is $1,354.17 interest and $226.00 principal.
Assumptions & limitations
- Results are rounded for display.
Frequently asked questions
How can I pay less interest?
Extra principal payments, especially early on, shorten the loan and cut total interest significantly.