Calculate your future mortgage payments and see a full amortization schedule to understand how much you’ll pay in interest over the life of your loan. This calculator uses the standard fixed-rate mortgage formula.
Mortgage Amortization Calculator
Calculated Monthly Payment (P&I)
$0.00Full Amortization Schedule
Mortgage Amortization Formula
The formula for calculating the fixed monthly mortgage payment (M) is:
$$M = P \frac{r(1+r)^n}{(1+r)^n – 1}$$
Where:
- $P$ = Principal Loan Amount
- $r$ = Monthly Interest Rate (Annual Rate / 12 / 100)
- $n$ = Total Number of Payments (Loan Term in Years × 12)
Formula Source: Investopedia – Mortgage Payment Calculation, Bankrate – Amortization
Variables Explained
- Loan Principal ($): The initial amount of money borrowed from the lender. This is the amount you will be paying interest on.
- Annual Interest Rate (%): The yearly interest percentage charged by the lender, expressed as a nominal rate.
- Loan Term (Years): The total length of time (in years) over which the loan is scheduled to be repaid. Common terms are 15 or 30 years.
Related Calculators
What is Mortgage Amortization?
Amortization refers to the process of paying off debt over time in regular installments. For a mortgage, each monthly payment consists of two parts: a portion that goes toward paying down the principal loan amount, and a portion that covers the interest expense accrued since the last payment.
In the early years of a typical mortgage, the majority of your monthly payment is allocated to interest. As the loan principal decreases with each payment, a larger portion of subsequent payments goes toward the principal, accelerating the payoff process in the later years. The amortization schedule generated by this calculator illustrates this balance shift over time.
Understanding amortization is crucial for homeowners because it reveals the true cost of borrowing and helps in deciding whether accelerating payments or refinancing is financially advantageous.
How to Calculate Mortgage Amortization (Example)
- Gather Inputs: Assume a $100,000 Principal (P), 6% Annual Rate (R), and 10-Year Term (T).
- Convert Variables: Calculate the total payments $n = 10 \times 12 = 120$. Calculate the monthly rate $r = 0.06 / 12 = 0.005$.
- Apply Formula: Substitute these values into the monthly payment formula: $$M = 100,000 \frac{0.005(1+0.005)^{120}}{(1+0.005)^{120} – 1}$$
- Solve for Payment: Calculating the result yields a Monthly Payment (M) of approximately $1,110.21.
- Generate Schedule: Using the monthly payment, calculate the remaining balance, interest paid, and principal paid for each of the 120 payments until the balance reaches zero.
Frequently Asked Questions (FAQ)
Is the monthly payment calculated here my final total monthly bill?
No. This calculator provides the Principal and Interest (P&I) portion of your payment. Your total bill will also include Escrow amounts for property Taxes and Insurance (PITI). These additional costs are highly variable and not included in the standard amortization formula.
How does adding an extra payment affect amortization?
Any extra payment applied directly to the principal immediately reduces the remaining balance, meaning less interest accrues in subsequent months. This shortens the loan term and saves a significant amount of money in total interest.
What is the difference between a simple interest loan and an amortizing loan?
An amortizing loan gradually pays down the principal over time. Simple interest loans (like many interest-only lines of credit) often require only interest payments for a period, leaving the full principal due at the end of the term.
Why is the interest payment higher at the beginning of the loan?
Interest is calculated on the remaining principal balance. Since the balance is highest at the beginning of the loan, the resulting interest charge is also the highest. As the principal is paid down, the interest charge naturally decreases.