Amortization Calculator for Home and Personal Loans: : Find Out How Much You’ll Pay Monthly
Understanding how your loan payments are structured can help you manage debt more effectively. Our Amortization Calculator breaks down your loan into easy-to-read monthly or yearly payments, showing exactly how much goes toward principal and how much covers interest. Whether you’re planning a home mortgage, personal loan, or auto financing, this calculator gives you a clear picture of your payment schedule, total interest costs, and remaining balance over time.
Amortization Calculator for Home and Personal Loans: Find Out How Much You’ll Pay Monthly
| Period | Principal | Interest | Payment | Ending balance |
|---|
What Is Amortization?
Amortization is the process of gradually paying off a loan through scheduled payments. Each payment is divided into two parts:
Principal: The amount that goes toward reducing your original loan balance.
Interest: The cost of borrowing money from your lender.
At the beginning of your loan term, a larger portion of your monthly payment goes toward interest. Over time, as your balance decreases, more of each payment goes toward principal. This shifting balance between interest and principal is what an amortization schedule displays. Learn more about how amortization works and why it matters for loans. Investopedia – Amortization Definition
How to calculate amortization
To create an amortization schedule you need the loan principal, the monthly payment, the loan term and the annual interest rate. The amortization calculator applies the standard amortization formula to calculate the monthly interest payment, the principal repayment, and the remaining loan balance for each payment period.
Step 1 — convert annual rate to monthly rate
Divide the annual interest rate by 12 to get the monthly interest rate:
monthly interest rate = (annual interest rate) / 12
Step 2 — calculate the interest portion for the month
Multiply the current loan balance by the monthly interest rate to get the interest payment for that month:
interest payment = current loan balance × monthly interest rate
Step 3 — determine the principal portion
Subtract the interest payment from the fixed monthly mortgage payment to find the principal portion:
principal payment = monthly mortgage payment − interest payment
Step 4 — compute the new outstanding balance
Subtract the principal payment from the current loan balance to get the new outstanding balance:
new balance = current loan balance − principal payment
Those four steps compute the amortization for the first month. To build a full schedule, repeat steps 2–4 for each subsequent month, using the previous period’s outstanding balance as the current balance for the next period.
Worked example (30-year fixed mortgage)
Example: $200,000 loan, 3% annual interest (monthly rate = 0.03 / 12 = 0.0025), and a monthly payment of $843. Below shows the first two payments calculated using the steps above.
| Payment | Interest | Principal | Balance |
|---|---|---|---|
| Payment 1 | $200,000 × 0.0025 = $500.00 | $843 − $500 = $343.00 | $200,000 − $343 = $199,657.00 |
| Payment 2 | $199,657 × 0.0025 ≈ $499.14 | $843 − $499.14 ≈ $343.86 | $199,657 − $343.86 ≈ $199,313.14 |
In a spreadsheet, list each payment in its own row and repeat the calculations: compute interest = previous balance × monthly rate, then principal = payment − interest, and then new balance = previous balance − principal. Continue until the balance reaches zero (after the total number of payments: for a 30-year loan, that is 360 monthly payments).
Tip: small rounding differences can occur in each period; most amortization schedules adjust the final payment slightly to bring the balance exactly to zero.
Frequently Asked Questions About Amortization Calculators
1. What is an amortization calculator?
An amortization calculator helps you estimate your loan payments over time by showing how each monthly payment is split between principal and interest. It also provides a complete amortization schedule, detailing your outstanding balance after each payment.
2. How does an amortization calculator work?
The calculator uses your loan amount, term, interest rate, and payment frequency to calculate a repayment schedule. Each payment is broken down to show how much goes toward paying down the loan (principal) and how much covers interest. Over time, the interest portion decreases while the principal portion increases.
3. What information do I need to use an amortization calculator?
You’ll need the loan amount (principal), annual interest rate, loan term (in years), and payment frequency (usually monthly). You can also enter any extra payments to see how they affect your total interest and payoff time.
4. What does an amortization schedule show?
An amortization schedule displays a detailed month-by-month (or year-by-year) breakdown of your loan payments. It shows the portion of each payment that goes to interest, the portion applied to principal, and the remaining loan balance after each payment.
5. Why is amortization important?
Amortization helps borrowers understand how their payments reduce debt over time. It reveals how interest adds up and how extra payments can save thousands in interest and shorten the loan term. This information is crucial for financial planning and comparing loan options.
6. Can I use an amortization calculator for any loan type?
Yes. Amortization calculators work for most installment-based loans, such as mortgages, auto loans, student loans, and personal loans. However, they are not suitable for credit cards or variable-rate loans where the interest rate changes over time.
7. How can extra payments affect my amortization schedule?
Making extra payments on your loan reduces the principal balance faster. This decreases total interest paid and can shorten the repayment term by months or even years. Many calculators, including ours, allow you to add extra payments to see how much you can save.
8. What is the difference between simple interest and amortization?
Simple interest only considers interest on the original principal, while amortization recalculates interest based on the decreasing balance after each payment. With amortized loans, more of your payment goes toward interest at the beginning and more toward principal near the end of the loan term.
9. What happens if I refinance my loan?
Refinancing replaces your existing loan with a new one—often with a lower rate or different term. When you refinance, your amortization schedule resets based on the new loan details, potentially reducing your monthly payments or total interest cost.
10. Is the amortization calculator accurate?
Yes, it uses standard financial formulas to produce accurate results. However, real-world numbers can vary slightly depending on rounding, payment timing, lender fees, and taxes or insurance costs not included in the basic formula.
