How to calculate amortization
M = P × r ÷ (1 − (1 + r)⁻ⁿ) Balanceₖ = P(1 + r)ᵏ − M((1 + r)ᵏ − 1) ÷ r
Worked example. Monthly payment: $1,580.17 / month.
Example inputs — Loan amount: $250,000; Interest rate: 6.5%; Term: 30 years. Starting values are illustrative.
From George Guju, founder of Calculyn · Educational calculator guidance, not professional advice.
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.
Using the amortization estimate
Amortization explains how a level loan payment gradually clears a balance. The installment may stay constant, but its interest and principal portions do not. This calculator shows the first payment split, first-year interest and selected future balance checkpoints. Those numbers help answer a different question from affordability: how much of the loan will still be owed after several years of scheduled payments?
Step-by-step inputs
- Loan amount. Use the loan principal, not the property price unless the entire price is financed. For an existing loan, a fresh projection from the current balance is not a reconstruction of its original history. Starting example: $250,000 .
- Interest rate. Enter the fixed annual loan rate. Monthly interest is based on the outstanding balance and one-twelfth of this annual percentage. Starting example: 6.5% .
- Term. Choose the full modeled repayment term. Balance checkpoints later than a short loan's payoff should not be interpreted as additional payments. Starting example: 30 years .
Worked example with the starting values
Using the starting inputs, the estimate is Monthly payment: $1,580.17 / month.
The first interest charge comes from principal multiplied by the monthly rate. The rest of the first payment reduces principal. Later charges use a smaller balance, so progressively more of the same installment goes toward repayment. The checkpoints refer to scheduled payments, not resale equity or market value.
- Total interest
- $318,861
- First payment: interest
- $1,354.17
- First payment: principal
- $226.00
- Interest paid in year 1
- $16,168
- Balance after 5 years
- $234,027
Compare interest rate scenarios
All other inputs stay at their starting values. These are modeled comparisons, not quotes, predictions or individual recommendations.
| Interest rate | Monthly payment |
|---|---|
| 4.5% | $1,266.71 / month |
| 6.5% | $1,580.17 / month |
| 8.5% | $1,922.28 / month |
Make a useful comparison
Compare the first-payment principal portion with the total installment. On a long positive-rate loan, principal can be a relatively small share early on. That does not mean principal is never being repaid; the split changes as the balance falls.
Use the future-balance checkpoints when planning a sale or refinance. They approximate debt outstanding after scheduled installments. To estimate equity, compare that balance with a separate property-value scenario and subtract relevant selling costs.
Use a mortgage payoff tool for recurring extra principal. The basic amortization example assumes the stated payment schedule without additional deposits. Extra principal changes all subsequent interest charges and can move the payoff date forward.
Common mistakes to avoid
- Property taxes, homeowners insurance and HOA charges are not loan principal. They should not be read as amounts reducing the amortized balance.
- A refinance starts a new repayment schedule and may add fees. A lower new payment does not by itself mean you repay principal faster.
- Actual servicing may use particular payment dates, daily interest or final-payment rounding. Use the lender's payoff statement for a transaction, rather than a calculated checkpoint.
Part of these guides
Assumptions & limitations
- Results are rounded for display.
Formula and assumptions reviewed October 2026 by the Calculyn team. How we build our calculators
Frequently asked questions
What is an amortization schedule?
It lists each payment's interest charge, principal repayment and ending balance. This calculator shows the fixed monthly payment, first-payment split, year-one interest and selected balance milestones rather than a downloadable full schedule.
How do extra payments change my amortization schedule?
Money applied to principal reduces subsequent interest and usually shortens payoff if the scheduled payment stays unchanged. This calculator does not accept extra payments; use the mortgage extra payment calculator for that scenario.
Why is most of my early loan payment interest?
Interest is computed on the outstanding balance, which is highest at the start. For a long loan at a positive rate, early interest can take most of the level payment; the principal share increases as the balance falls.
Does an amortization calculator include taxes and insurance?
This one does not. Its payment is principal and interest only, with no escrow, fees or insurance. Use the mortgage calculator to add recurring homeownership costs.
Can I use an amortization calculator for a mortgage, auto loan, or personal loan?
Yes, when the loan has a fixed rate, equal monthly installments and the available term matches. Use the actual amount financed and contract rate; daily interest, fees, balloon payments and variable rates can make real schedules different.
What is the crossover point on an amortization table?
It is the first payment where principal repaid exceeds interest charged. It depends on rate and term, and some low-rate or short loans begin past it. This calculator shows the first-payment split but does not solve the crossover month.
What is the difference between amortization and simple interest?
Amortization describes how payments repay a loan; simple interest describes how interest is calculated on principal. A loan can be both amortizing and simple-interest. The two terms are not competing loan types.
Does the balance after five years include appreciation?
No. It is remaining loan debt. Appreciation affects the asset value, not the loan's repayment arithmetic.