Amortization Calculator

The amortization formula

For a fixed-rate installment loan, the monthly payment is:

M = P × (r(1+r)^n) / ((1+r)^n - 1)

Where:

• M = monthly payment
• P = principal, or the amount borrowed
• r = monthly interest rate, annual rate divided by 12
• n = total number of monthly payments, years × 12

What each schedule column means

Why early payments are mostly interest

The payment stays fixed, but interest is recalculated every month as current_balance × r. In the first months the balance is still close to the original principal, so the interest portion is high and the principal portion is small. As the balance falls, more of the same payment goes toward principal. That is why a 30-year mortgage can feel slow at first and only reaches the halfway point well after year 15.

Example: 30-year vs. 15-year loan

A $300,000 fixed-rate loan at 6.5% for 30 years:

• Monthly principal and interest: $1,896.20
• Total paid: $682,633
• Total interest: $382,633

The same loan paid over 15 years:

• Monthly principal and interest: $2,613.32
• Total paid: $470,398
• Total interest: $170,398

The shorter term raises the monthly payment by about 38%, but it saves more than $200,000 in interest in this example.

Extra payment impact

Extra principal lowers the balance immediately, so the next month’s interest is calculated on a smaller amount. Even a modest extra payment can shorten a long loan, but the benefit depends on how long you keep the loan. If you expect to refinance, sell the home, or trade the car soon, compare the interest saved with what you could do with the same cash elsewhere.