Amortization Calculator

How amortization works

An amortizing loan has one constant payment, but what that payment buys changes every single month. Early on, most of it is interest on a large outstanding balance and only a sliver reduces the debt. As the balance falls, the interest portion falls with it and the principal share grows. By the final year, almost the entire payment is principal — which is why the balance on a long mortgage moves so slowly at the start.

The formula behind it

The fixed payment comes from P × r × (1 + r)ⁿ / ((1 + r)ⁿ − 1), where P is the loan amount, r the monthly rate and n the number of payments. Each month the interest due is balance × r, and whatever remains of the payment reduces the balance. On 200,000 at 6% over 25 years, the first payment of about 1,288 is roughly 1,000 interest and only 288 principal.

How to use this calculator

Enter the loan amount, the annual interest rate and the term in years. The result shows the monthly payment and how that first payment splits between interest and principal — the clearest single snapshot of where your money is actually going.

Using the schedule to your advantage

Because early payments are interest-heavy, extra payments made in the first years are worth far more than the same amount paid later: each one removes principal that would otherwise have accrued interest for the entire remaining term. Even one additional payment a year can shorten a 25-year loan by several years. Confirm with your lender that overpayments reduce the principal rather than being held against future instalments.