Use this amortization mortgage calculator to quickly determine your monthly loan payments, total interest paid, and visualize the full amortization schedule.
Amortization Mortgage Calculator
Estimated Monthly Payment:
Amortization Mortgage Calculator Formula
Where:
M = Monthly Payment | P = Principal Loan Amount
i = Monthly Interest Rate (Annual Rate / 1200) | n = Total Payments (Years × 12)
Formula Source: Investopedia – Mortgage Formula
Variables Used in the Calculator
To use the calculator, you need to provide the following three essential variables:
- Loan Amount (P): The total principal borrowed. This is the purchase price minus any down payment.
- Annual Interest Rate (%): The annual rate charged by the lender. The calculator divides this by 12 and 100 to get the monthly decimal rate (i).
- Loan Term (Years): The duration of the loan, typically 15 or 30 years for a mortgage. This is multiplied by 12 to get the total number of payments (n).
Related Calculators
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- Home Equity Line of Credit (HELOC) Calculator
- Compound Interest Projection Tool
- Debt-to-Income (DTI) Ratio Checker
- Refinance Break-Even Point Calculator
What is Amortization Mortgage Calculator?
An amortization mortgage calculator is a crucial tool for anyone planning to purchase a home or refinance an existing mortgage. It performs two key functions: calculating the fixed monthly payment required to fully pay off the loan by the end of its term, and generating a detailed schedule (the amortization schedule) showing how much of each payment goes toward interest and how much goes toward the principal.
Amortization itself is the process of gradually paying off a debt over a fixed period. In a typical mortgage, the early payments are heavily weighted towards interest. As the loan matures, the portion of your payment dedicated to reducing the principal increases, which is why your loan balance shrinks faster toward the end of the term.
Understanding this schedule allows borrowers to see the total cost of the loan, assess the impact of extra principal payments, and gain transparency into their financial commitment.
How to Calculate Monthly Payments (Example)
Let’s use an example with a $200,000 loan, 5% annual rate, and 30-year term:
- Determine the Monthly Rate (i): Divide the annual rate by 1200 (for rate and percentage conversion): $i = 5 / 1200 = 0.0041667$.
- Determine the Total Payments (n): Multiply the loan term by 12: $n = 30 \times 12 = 360$ payments.
- Calculate the Numerator and Denominator:
- Numerator: $i(1+i)^n = 0.0041667 \times (1.0041667)^{360} \approx 0.021028$
- Denominator: $(1+i)^n – 1 = (1.0041667)^{360} – 1 \approx 3.864756$
- Calculate the Payment Factor: Divide the Numerator by the Denominator: $0.021028 / 3.864756 \approx 0.0054415$.
- Calculate the Monthly Payment (M): Multiply the Loan Amount (P) by the factor: $M = \$200,000 \times 0.0054415 \approx \$1,088.30$.
Frequently Asked Questions (FAQ)
- How does making extra payments affect my amortization?
- Extra principal payments significantly shorten the loan term and reduce the total interest paid. The calculator can show you how much faster you’d pay off your mortgage by adjusting your monthly principal contribution.
- Is the monthly payment always the same?
- Yes, for a fixed-rate mortgage, the required total payment is the same every month. However, the amount of that payment applied to interest and principal changes over time.
- What is the difference between principal and interest?
- Principal is the outstanding balance of the loan, while interest is the cost of borrowing the money. Early payments are mostly interest; later payments are mostly principal.
- Why is the loan amount different from the total purchase price?
- The loan amount is the money borrowed, which typically equals the purchase price minus your down payment. The calculation only amortizes the borrowed amount.