Amortization calculator
A standard amortising schedule. Fees, insurance, escrow and any rate change are not included, so the real schedule from a lender will differ in the detail.
An amortising loan has a level payment split between interest and principal, with the split shifting over time. On a $250,000 loan at 6.5% over 30 years the payment is $1,580.17, of which the first one is $1,354.17 interest and $226.00 principal. The last is $8.51 interest and $1,571.66 principal.
How to read an amortization schedule
The front-loading of interest is the most consequential feature of an amortising loan, and it is the reason overpaying early is worth so much more than overpaying late. Every extra dollar of principal paid in year one removes thirty years of interest on that dollar; the same dollar in year twenty-five removes five. The same mechanism explains why moving house every few years means paying mostly interest for a lifetime: each new mortgage restarts the schedule at its most interest-heavy point.
Three milestones on the default loan
Payment 233, in year twenty of thirty, is the first one where the principal portion exceeds the interest portion. Month 257, past year twenty-one, is where the balance finally falls below half the original amount. The first twelve payments total $18,962 and retire $2,794.31 of debt, leaving $247,205.69 owing. None of that is a quirk of these numbers; it is what a level payment against a declining balance does at any rate high enough to matter, and it is why the total interest on this loan is $318,861.22, more than the sum borrowed.
Overpayments and the shape of what they buy
An extra $100 a month clears the loan in 304 months instead of 360 and removes $58,859.89 of interest. Doubling that to $200 removes $97,618.12, which is less than twice as much. Five hundred removes $163,515.95, less than three times the first figure. The returns diminish because each additional dollar retires principal that was already going to be retired sooner. The first overpayment is always the most valuable one, and the ceiling is the loan itself.
Term does the same work through a different door. The same $250,000 at 6.5% costs $141,998.31 in interest over fifteen years and $318,861.22 over thirty, for a payment of $2,177.77 against $1,580.17. Half the interest for 38% more a month.
What people use it for
- Seeing exactly where mortgage payments go
- Working out what an overpayment saves
- Checking a lender statement against the expected balance
- Comparing a 25-year and a 30-year term
- Finding the payment at which principal finally overtakes interest
- Deciding whether a shorter term is affordable before applying
Questions
Repaying a loan through level payments that cover interest first and gradually shift toward principal.
Interest is charged on the outstanding balance, which is at its largest at the start. As the balance falls, so does the interest portion, and the principal portion grows to fill the same level payment.
On the default loan, $1,354.17 of $1,580.17, about 86%. The final payment is $8.51 of $1,580.17.
Payment 233 of 360 on these numbers, in year twenty. Before that, more than half of every payment is rent on the money.
Month 257, past the twenty-one-year mark. Seventy-one per cent of the term retires the first half of the debt and the remaining 29% retires the second.
$247,205.69 of the original $250,000. Twelve payments totalling $18,962 retired $2,794.31 of debt and $16,167.73 of interest.
Substantially, and most in the early years. An extra $100 a month here removes 56 months and $58,859.89 of interest.
No. $100 a month saves $58,859.89, $200 saves $97,618.12 and $500 saves $163,515.95. Each extra dollar retires principal that was going to be retired anyway, a little sooner.
$2,177.77 a month over fifteen years against $1,580.17 over thirty. The interest falls from $318,861.22 to $141,998.31, so 38% more a month buys 55% less interest.
Compare the loan rate against a realistic after-tax return. Overpaying is a guaranteed return at the loan rate with no volatility, which is worth more than the headline comparison suggests.
Shortening the term commits you; overpaying does not. The arithmetic is close to identical, and the difference is what happens in a year when money is tight.
Only if told to. Some lenders hold an unlabelled extra payment against the next instalment instead, which saves nothing. Say in writing that it is a principal reduction.
On many loans no, on some yes, and on fixed-rate deals a limit is common. Check the agreement before planning around the figures here.
Interest-only pays no principal, so the balance never falls and the full amount is due at the end. Every payment is the interest column and the principal column is zero throughout.
No. This is principal and interest only. A real mortgage payment usually adds property tax and insurance collected alongside it, and neither of those retires any debt.
Rounding, the day count the lender uses and the exact posting date of each payment all shift the figures by small amounts. The shape will match; the cents will not.
Yes. The schedule assumes one fixed rate for the whole term. For a variable loan, run it again from the current balance at the new rate and the months remaining.
Yes. The maths is identical for any level-payment loan; only the term and rate differ, and the front-loading is milder because the term is shorter.