Amortization Calculator

Amortization is the process of paying off a debt through regular scheduled payments over time. Each payment covers both interest owed and a portion of the principal balance. Because interest is calculated on the remaining principal, the split between principal and interest shifts with each payment.

Early in the loan, most of your payment goes to interest. As the principal shrinks, the interest portion decreases and your equity builds faster. This is why the first years of a mortgage feel slow for equity building.

Monthly payment is calculated with:

M = P × [r(1+r)^n] / [(1+r)^n − 1]

• M = monthly payment
• P = principal (loan amount)
• r = monthly interest rate (annual rate ÷ 12 ÷ 100)
• n = total number of monthly payments (term in years × 12)

For a $300,000 loan at 6.5% for 30 years: r = 0.065/12 ≈ 0.00542, n = 360. Monthly payment ≈ $1,896.20.

• Make biweekly payments. Paying half your monthly payment every two weeks results in 26 half-payments (13 full payments) per year instead of 12. On a 30-year mortgage you can cut years off the term.
• Add to the principal each month. Even small extra payments reduce the principal and therefore future interest. Check that your lender applies extra payments to principal, not future interest.
• Refinance at a lower rate. If rates have dropped since you originated, refinancing can reduce your monthly payment or shorten your term. Account for closing costs when evaluating whether it makes sense.