How the Loan Amortization Calculator works
An amortization schedule breaks a loan down payment by payment, showing exactly how much of each fixed monthly payment covers interest and how much reduces your principal balance. Because interest is charged on whatever balance remains, the split between the two changes every single month even though the payment itself stays constant.
Your fixed payment is found with the standard amortization formula, and each month's interest is simply that month's starting balance multiplied by the monthly interest rate.
Whatever is left of the payment after interest is subtracted goes straight to principal, which lowers the balance used to calculate next month's interest — and the cycle repeats until the balance reaches zero.
A worked example
A $250,000 mortgage at 6.75% over 30 years has a principal-and-interest payment of $1,621.50. In month one, $1,406.25 is interest and only $215.25 is principal. It takes until roughly year 21 before more than half of each payment goes to principal.
| Year | Interest that year | Principal that year | Year-end balance |
|---|---|---|---|
| 1 | $16,758 | $2,700 | $247,300 |
| 10 | $14,720 | $4,738 | $213,150 |
| 30 | $690 | $18,768 | $0 |
Total interest over the full term is about $333,738 — more than the amount borrowed. That front-loading of interest is why extra principal payments in the early years are so powerful.
How to read your schedule
Each row is one payment. Interest is the lender's charge on that month's opening balance; principal is what actually reduces your debt; balance is what you still owe afterward. The cumulative interest column shows how the cost adds up over time.
When to use this calculator
Use the full schedule when you want to see the mechanics, not just the summary: how little principal you pay in the first few years, how much you would still owe if you sold or refinanced at a given point, or how a single extra payment ripples through every row that follows.
Common mistakes to avoid
- Assuming half the term means half the balance paid. On a 30-year loan you are nowhere near halfway paid off at year 15.
- Ignoring the payoff effect of early principal. A dollar of extra principal early saves far more interest than the same dollar near the end.
- Forgetting escrow. The schedule shows principal and interest only; your real mortgage bill is usually higher.