This amortization calculator builds a complete yearly amortization schedule for any fixed-rate loan — mortgage, auto, personal, or student. Enter the loan amount, interest rate, and term to see your monthly payment plus a year-by-year breakdown of principal paid, interest paid, cumulative interest, and remaining balance.
Amortization is the process of paying off a loan with regular, equal payments where each payment covers that period’s interest first and applies the rest to principal. Understanding this schedule shows you exactly where your money goes — and why extra payments early in a loan save so much more than the same payments made later.
How Amortization Works
Every amortized loan follows the same three-step cycle each month:
1. Interest is charged on the current balance: interest = balance × (annual rate ÷ 12). 2. Your fixed payment covers that interest first. 3. Whatever remains reduces the principal balance.
The fixed payment itself comes from the amortization formula:
M = P × [r(1 + r)^n] / [(1 + r)^n − 1]
Because the balance is largest at the start, the interest charge is largest at the start too — which is why the first payments on a 30-year mortgage may be 80%+ interest. As principal falls, interest falls with it, and the principal share of each identical payment grows. The final payment is almost entirely principal.
Reading Your Amortization Schedule
The yearly table condenses 12 monthly payments into each row. Key things to look for:
- The crossover point: the year when principal paid finally exceeds interest paid. On a 30-year loan at 6%, this happens around year 19.
- Cumulative interest: on long loans, total interest often exceeds the original amount borrowed.
- Balance decline is not linear — the balance falls slowly at first and rapidly at the end.
- Extra principal payments skip ahead in the schedule: paying an extra $200 per month on a $250,000, 30-year loan at 6% pays it off nearly 8 years early and saves roughly $86,000 in interest.
- Refinancing restarts the schedule, putting you back in the interest-heavy early years.
Example: $250,000 Loan at 6% for 30 Years
A $250,000 loan at 6% APR for 30 years has a monthly payment of about $1,498.88 (360 payments).
The very first payment splits into $1,250.00 of interest (250,000 × 0.005) and only $248.88 of principal. During year one you pay about $17,987 total, but only around $3,070 reduces the balance — the other $14,917 is interest.
Over the full term, total payments come to roughly $539,595, of which about $289,595 is interest — more than the original loan. This is why shorter terms and early extra payments are so powerful: a 15-year term at the same rate costs about $129,736 in interest, less than half as much.
Frequently Asked Questions
What is amortization?
Amortization is repaying a loan through fixed, regular payments that cover interest first and principal second, calculated so the balance reaches exactly zero at the end of the term. An amortization schedule is the table showing that split for every payment period.
Why is most of my early payment going to interest?
Interest is charged on the outstanding balance, which is largest at the beginning of the loan. On a $250,000 loan at 6%, the first month’s interest alone is $1,250, leaving only $249 of a $1,499 payment for principal. As the balance falls, the ratio steadily reverses.
How do extra payments affect my amortization schedule?
Extra payments apply entirely to principal, permanently reducing the balance that future interest is charged on. This shortens the loan and cuts total interest — an extra $200 monthly on a 30-year, $250,000 loan at 6% saves roughly $86,000 and nearly 8 years.
When does principal exceed interest in my payments?
It depends on rate and term. On a 30-year loan at 6%, monthly principal first exceeds interest around year 19; at 4% it happens near year 13. Shorter terms cross over much sooner because more of each payment is principal from the start.
What is negative amortization?
Negative amortization happens when your payment is smaller than the interest charged, so the unpaid interest is added to the balance and the loan grows instead of shrinking. It can occur with some income-driven student loan plans and certain adjustable-rate mortgages with minimum-payment options.