Loan Amortization Calculator

How it works

An amortizing loan is repaid through a series of equal scheduled payments. Each payment is split between interest on the outstanding balance and a reduction of the principal.

With a fixed-rate loan the payment stays the same for the whole term. Early on, most of each payment is interest because the balance is large. As the balance falls, the interest portion shrinks and more of each payment goes to principal.

The schedule shows, for each payment, how much goes to interest, how much to principal, and the balance remaining afterwards. The final payment is adjusted to clear the balance exactly.

Formula

r = annual rate ÷ 12        n = years × 12
M = P × r × (1 + r)^n ÷ ((1 + r)^n − 1)
M = P ÷ n                   when r = 0
interest_k  = balance_(k−1) × r
principal_k = M − interest_k

Example

A $300,000 loan at 6% for 30 years has a monthly rate of 0.5% and 360 payments. The formula gives a payment of $1,798.65.

The first payment is $1,500.00 of interest (0.5% of $300,000) and $298.65 of principal. Over the full term the borrower pays $347,514.57 in interest, for a total of $647,514.57.

Assumptions and limitations

• The interest rate is fixed for the whole term.
• Payments are made monthly and the loan fully amortizes.
• Extra payments are not modelled.
• Property taxes, insurance, fees and escrow are not included unless you add them to the loan amount.
• Results are for informational and educational purposes and are not financial advice. Verify important figures with your lender.

Frequently asked questions