Amortization Schedule Calculator

Mortgage loans use a method called amortization, where each monthly payment covers interest first, then principal. Since interest is calculated on the remaining balance, the interest portion is largest at the start when your balance is highest. As you pay down the principal, the interest portion shrinks and more of each payment goes toward the loan balance. On a $250K loan at 6.5%, your first payment puts about $1,354 toward interest and only $227 toward principal.

Extra payments go directly toward your principal balance, which reduces the interest charged on subsequent payments. Even small extra monthly payments can save thousands in interest and shave years off your loan. For example, adding just $100/month to a $250K, 30-year loan at 6.5% saves roughly $55,000 in interest and pays off the loan about 5 years early.

With amortization, you make equal monthly payments that systematically pay off both interest and principal over a fixed term. With simple interest, interest is calculated only on the remaining principal (similar to amortization) but the structure may differ — some simple interest loans do not have a fixed payoff schedule. Most mortgages, auto loans, and personal loans use amortization.