Mortgages / Amortization Calculator
Amortization Calculator
Our mortgage amortization calculator takes into account your loan amount, loan term, interest rate and loan start date to estimate the total principal and interest paid over the life of the loan. Adjust the fields in the calculator below to see your mortgage amortization.
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What is amortization?
Amortization is the process of gradually paying off a debt through a series of fixed, periodic payments over an agreed upon term. The payment consists of both interest on the debt and the principal on the loan borrowed. At first, more of the monthly payment will go toward the interest. As more principal is paid, less interest is due on the remaining loan balance. You can estimate your mortgage loan amortization using an amortization calculator.
What is an amortization schedule?
An amortization schedule is a table that shows the amount of interest and principal you pay each month over time. In addition, the schedule will show you the total interest paid to date and the remaining principal balance on the loan. A mortgage loan is typically a self-amortizing loan, which means both principal and interest will be fully paid off when you make the last payment on the predetermined schedule — usually monthly. Our mortgage amortization table shows amortization by month and year.
How to calculate amortization
In order to make an amortization schedule, you'll need to know the principal loan amount, the monthly payment amount, the loan term and the interest rate on the loan. Our amortization calculator will do the math for you, using the following amortization formula to calculate the monthly interest payment, principal payment and outstanding loan balance.
Step 1: Convert the annual interest rate to a monthly rate by dividing it by 12.
Annual interest rate/ 12 = monthly interest rate
Step 2: Multiply the loan amount by the monthly rate to get the interest payment.
Loan amount * monthly rate = interest payment
Step 3: Subtract the monthly mortgage payment from the interest to determine the principal payment.
Monthly mortgage payment - interest payment = principal payment
Step 4: Subtract the principal from the loan amount to get the outstanding loan balance.
Loan amount - principal payment = outstanding loan balance
The above steps calculate monthly amortization for the first month out of the 360 months in a typical 30-year loan. For the remaining months, repeat steps two through four using the previous outstanding loan balance as the new loan amount for the next month in the schedule.
For example, you can use the steps above to calculate amortization on a 30-year fixed-rate mortgage valued at $200,000 with a 3% interest rate (0.0025 monthly rate) and a monthly payment amount of $843. In a spreadsheet, show the first payment in row one, the interest payment in one column, the principal payment in the next column and the loan balance in the last column.
| Payment | Interest | Principal | Balance |
|---|---|---|---|
| Payment 1 | $200,000 x 0.0025 = $500 | $843-$500 = $343 | $200,000 - $343 = $199,657 |
| Payment 2 | $199,657 x 0.0025 = $499 | $843 - $499 = $344 | $199,657 - $344 = $199,313 |
How to calculate amortization with an extra payment
Extra payments on a mortgage can be applied to the principal to reduce the amount of interest and shorten the amortization. To calculate amortization with an extra payment, simply add the extra payment to the principal payment for the month that the extra payment was made. Any additional extra payments throughout the loan term should be applied in the same way. Keep in mind, while you can pay off your principal early, in some cases there may be a pre-payment penalty for paying the loan off too early.
How to calculate the monthly payment on a mortgage
The easiest way to calculate loan payments is to use an amortization calculator. If trying to manually calculate amortization, you can use the PMT function in an Excel spreadsheet. The PMT function calculates payments on a loan based on constant payments and a constant interest rate. The format of the PMT function looks like this:
=PMT(annual interest rate/number of payment periods, number of years of the loan, present value of the loan)
If calculating the monthly payment on a 30-year fixed-rate mortgage valued at $200,000 with a 3% interest rate, the PMT function would look like the below and return a monthly payment amount of $843.
=PMT(0.03/12,360,200000)
Why use an amortization calculator?
Besides saving you the time to manually do all the math, a mortgage amortization calculator can help you determine:
- How much principal and interest you owe now and in the future.
- How much principal and interest you paid over the life of the loan.
- How much principal and interest you paid during a particular year or month.
