How do you calculate a loan amortization schedule?
Find the level payment, then work through one payment at a time. Each month, interest is the monthly rate times what you still owe. The rest of the payment goes to principal, and the balance falls.
Payment = P × r(1 + r)^n ÷ ((1 + r)^n − 1)Interest this month = balance × r ; principal this month = payment − interestHere P is the loan, r the monthly rate (annual rate ÷ 12), and n the number of payments. For $200,000 at 6.5% over 360 months, r is 0.005417 and the payment is $1,264.14. In month one, interest is $1,083.33 and principal is $180.81, leaving $199,819.19. Repeat with the new balance. Rounding to the cent leaves a small difference, so the last payment here is $1,259.56, which clears the loan exactly.
How much of each payment is interest?
Early on, most of it. Here more goes to principal than to interest only from payment 233, 19 yrs 5 mos in. You don't owe half the loan until payment 257, 21 yrs 5 mos in. That's why selling or refinancing early can leave you owing nearly what you borrowed.
| Year | Paid | Principal | Interest | Interest share | Balance |
|---|---|---|---|---|---|
| 1 | $15,170 | $2,236 | $12,934 | 85.3% | $197,765 |
| 5 | $15,170 | $2,897 | $12,272 | 80.9% | $187,222 |
| 10 | $15,170 | $4,006 | $11,163 | 73.6% | $169,552 |
| 15 | $15,170 | $5,540 | $9,630 | 63.5% | $145,117 |
| 20 | $15,170 | $7,661 | $7,509 | 49.5% | $111,329 |
| 25 | $15,170 | $10,594 | $4,576 | 30.2% | $64,605 |
| 30 | $15,165 | $14,645 | $521 | 3.4% | $0 |
To see the split for any payment, enter its number under the advanced options. Use it when you're weighing a refinance or a sale, because it shows what you've really paid down so far.
What does a 20-year amortization schedule look like?
A shorter schedule costs more each month but far less overall. On $200,000 at 6.5%, a 20-year schedule costs $1,491.15 a month against $1,264.14 for 30 years, and cuts total interest from $255,086 to $157,874.
| Term | Monthly payment | Total interest | Total paid | First payment that is interest |
|---|---|---|---|---|
| 5 years | $3,913.23 | $34,794 | $234,794 | 27.7% |
| 10 years | $2,270.96 | $72,515 | $272,515 | 47.7% |
| 15 years | $1,742.21 | $113,599 | $313,599 | 62.2% |
| 20 years | $1,491.15 | $157,874 | $357,874 | 72.7% |
| 25 years | $1,350.41 | $205,126 | $405,126 | 80.2% |
| 30 years | $1,264.14 | $255,086 | $455,086 | 85.7% |
It works the same for any fixed-rate loan, such as a car loan. $30,000 at 7.5% over five years costs $601.14 a month and $6,068 in interest. Adding $50 a month saves $575. If you only need a payment figure, the auto loan calculator or personal loan calculator is faster.
How do extra payments change the schedule?
An extra dollar applied to principal stops costing you interest for the rest of the loan. That's why money paid early does so much more than money paid late. Adding $100 a month to this example cuts 5 yrs 7 mos off the loan.
| Extra a month | Paid off in | Interest saved | Total interest |
|---|---|---|---|
| $50 | 26 yrs 10 mos | $31,957 | $223,128 |
| $100 | 24 yrs 5 mos | $55,944 | $199,141 |
| $250 | 19 yrs 5 mos | $102,776 | $152,309 |
| $500 | 14 yrs 9 mos | $144,146 | $110,940 |
| $1,000 | 10 yrs 1 mo | $182,234 | $72,851 |
You can also add a yearly extra, one-time payments at any payment number, and a later start. Biweekly plans are a form of this. Half the payment every two weeks makes 26 half payments a year, the same as 13 monthly payments. If each one is credited on arrival, this loan ends in 24 yrs 2 mos and saves $58,746. Yearly payments go the other way: with one payment of $15,315.49 a year, interest builds all year, and you'd pay $259,465.
What is a 5-year loan with a 20-year amortization?
You make payments as if the loan ran 20 years, but the balance comes due after five. On $250,000 at 7%, that's $1,938.25 a month, then a final balloon of $215,641 on top of the last payment. After 60 payments you've paid off only $34,359 of the loan. The low payment isn't a low cost: you need the cash, or a new loan, when the balloon arrives. Set Balloon due after to 5 in the advanced options to see it.
When an amortization schedule won't match your statement
- It covers principal and interest only. A mortgage payment often adds taxes, insurance, and PMI. Our mortgage calculator includes those, along with HOA dues.
- Some lenders charge for paying early. The Consumer Financial Protection Bureau (CFPB) says small extra principal payments usually don't trigger a prepayment penalty, but paying off the balance may on some loans. Read your loan documents and ask.
- Some loans don't work this way. The CFPB warns that on a precomputed auto loan, paying extra may not save you interest. This schedule assumes simple interest, charged on the balance.
- Daily interest shifts the numbers. Some loans charge interest by the day, so paying late or early moves small amounts between principal and interest. Your servicer's payoff figure is the one that counts.
- Extra money isn't always applied the way you'd assume. Tell your servicer it's for principal and check your next statement.
- Adjustable rates need a different tool. After a rate change, this schedule no longer applies. Use the adjustable-rate mortgage calculator.
For a mortgage you're struggling with, a HUD-approved housing counselor can help, often at little or no cost.
Common questions
What does amortization mean?
Paying off a loan through regular payments that cover both interest and principal, so the balance reaches zero at the end of the term. A balloon loan doesn't fully amortize, so you still owe a large sum after the regular payments end.
Can I enter my payment instead of a term?
Yes. Choose Payment under "I know the", and enter what you pay. The calculator shows how long it takes. If the payment doesn't cover the interest, it tells you the loan never gets paid off at that amount.
Does this include taxes and insurance?
No. This is any fixed-rate loan, principal and interest only. For a mortgage payment with taxes, insurance, and PMI, use the mortgage calculator.
Can I download the schedule to Excel?
Yes. Both the yearly and payment-by-payment tables download as CSV files that open in Excel or any other spreadsheet.
Can I use my real dates?
Yes. Set your first payment month and year under the advanced options. The schedule then dates every payment. Biweekly dates are approximate, since those payments don't fall on a set day of the month.
Should I pay extra or refinance?
It depends on the rate you could get and what a new loan costs. Compare them with the mortgage payoff calculator and the refinance calculator.
Sources
- How does paying down a mortgage work? · Consumer Financial Protection Bureau
- What is a prepayment penalty? · Consumer Financial Protection Bureau
- What's the difference between a simple interest rate and precomputed interest on an auto loan? · Consumer Financial Protection Bureau