About the Amortization Calculator
An amortisation calculator shows how a fixed loan payment splits between interest and principal, and how that split shifts over the life of the loan. It answers the question a payment calculator cannot: not just what you pay each month, but how much of the debt you will actually have cleared at any point along the way.
The formula
Interestₖ = Bₖ₋₁ · r and Principalₖ = M − InterestₖBₖ₋₁ is the balance before payment k, r is the monthly interest rate, and M is the fixed monthly payment. Each payment covers that month's interest first; whatever is left reduces the balance.
How to use this calculator
- 1Enter your Loan Amount ($). The field starts at
300000, which you can overwrite. - 2Enter your Loan Term (Years). The field starts at
30, which you can overwrite. - 3Enter your Interest Rate (%). The field starts at
6.5, which you can overwrite. - 4Read the result straight away — it recalculates as you type, so there is no button to press. Use Share to copy a link that reopens the page with your exact numbers filled in.
Worked example
| Input | Value |
|---|---|
| Loan Amount ($) | 300000 |
| Loan Term (Years) | 30 |
| Interest Rate (%) | 6.5 |
Result
Total Interest Paid: $382,633.47
Those are the values the page loads with, so you can reproduce this result yourself and then change one field at a time to see what drives the outcome.
Understanding your result
Amortisation is front-loaded by arithmetic, not by lender design. Interest is charged on the outstanding balance, and the balance is highest at the start, so early payments are mostly interest. On a typical 30-year mortgage at current rates, you are past the halfway mark of the term before principal overtakes interest in a single payment.
This is why total interest is so sensitive to how long you hold the loan. Selling or refinancing in year five means you have paid tens of thousands in interest while barely denting the balance. It is also why extra principal payments are most powerful early: money applied in year two avoids 28 more years of compounding, money applied in year 25 avoids only five.
Things worth knowing
- Ask your lender for the full amortisation schedule before signing. It is the clearest picture of what a loan actually costs.
- Extra payments only accelerate the loan if they are applied to principal. Some servicers default to holding them as a prepayment of next month's bill, so state the instruction explicitly.
- Total interest paid, not the monthly payment, is the honest measure when comparing two loan terms.
- Interest-only and balloon loans do not amortise. Nothing comes off the balance during the interest-only period, so this schedule does not describe them.
Frequently asked questions
What does amortisation actually mean?+
It is the process of paying off debt through scheduled equal payments where each one covers accrued interest first and reduces the principal with the remainder. An amortising loan reaches a zero balance exactly on the final scheduled payment.
Why does so little come off my balance in the first year?+
Because interest is charged on the full outstanding balance, and in year one that balance is nearly the entire loan. On a 30-year mortgage roughly 80 percent of each early payment is interest, so the balance falls by only 1 to 2 percent in the first twelve months.
When is the best time to make extra principal payments?+
As early as possible. An extra payment in the first years removes interest that would otherwise compound for the remaining decades, so the same dollar saves several times more than it would near the end of the term.
Does refinancing restart amortisation?+
Yes. A new 30-year loan puts you back at the front-loaded stage even if you were ten years into the old one. That can still be worthwhile if the rate drop is large, but compare total remaining interest rather than just the monthly payment.