Use the mortgage loan amortization calculator to quickly determine your monthly payment, the total interest you will pay, or the maximum loan amount you can afford. Simply fill in three of the four required fields, and the calculator will solve for the missing variable.
Mortgage Loan Amortization Calculator
Mortgage Loan Amortization Formula
M = P × [ i(1 + i)^n ] / [ (1 + i)^n - 1 ]
Where: M = Monthly Payment; P = Principal Loan Amount; i = Monthly Interest Rate (Annual Rate / 12); n = Total Number of Payments (Loan Term in Years × 12).
Formula Sources: Investopedia, CFPB (Consumer Financial Protection Bureau).
Variables Explained
- Loan Principal Amount (P): The initial amount borrowed.
- Annual Interest Rate (I): The yearly percentage rate charged for the loan.
- Loan Term (N): The length of the loan in years (e.g., 15 or 30 years).
- Monthly Payment (M): The fixed amount paid every month, which includes both principal and interest.
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What is a Mortgage Loan Amortization Calculator?
A mortgage loan amortization calculator is a financial tool that determines the periodic payments required to pay off a loan by the end of its term. Amortization refers to the process of paying off debt over time in regular installments, where each payment consists of both principal repayment and interest charges.
Crucially, this calculator shows how the distribution of principal and interest changes over the loan’s life. In the early years, the bulk of your monthly payment goes toward interest. As the principal balance decreases, a larger portion of each subsequent payment is applied to the principal, accelerating the debt payoff. It’s the essential tool for budget planning and understanding long-term borrowing costs.
How to Calculate Monthly Payment (Example)
Let’s find the Monthly Payment (M) for a $200,000 loan at 4.5% interest over 30 years:
- Convert the Annual Rate (I) to a Monthly Rate (i): 4.5% / 12 months / 100 = 0.00375.
- Calculate the Total Number of Payments (n): 30 years × 12 months/year = 360 payments.
- Plug Values into the Formula: $M = 200,000 \times [ 0.00375(1 + 0.00375)^{360} ] / [ (1 + 0.00375)^{360} – 1 ]$.
- Solve the Exponent and Terms: $(1.00375)^{360} \approx 3.8283$.
- Final Calculation: $M \approx 200,000 \times 0.00506685 \approx 1,013.37$. The monthly payment is $1,013.37.
Frequently Asked Questions (FAQ)
What is an amortization schedule?
An amortization schedule is a table that details every periodic payment, showing the exact amount of principal and interest included in each payment, and the remaining balance after each payment is made.
Does this calculator include property taxes or insurance?
No. This calculator focuses only on the principal and interest (P&I) portion of your payment. For your full housing payment (PITI), you must manually add taxes, insurance, and any HOA fees.
Why does the interest payment decrease over time?
Interest is calculated based on the *remaining principal balance*. Since the principal balance decreases with every payment you make, the interest owed on that smaller balance also decreases, allowing more of your fixed payment to go toward the principal.
Can I use this for other types of loans?
Yes, the fundamental amortization formula works for any fixed-rate, fully amortizing loan, such as car loans, personal loans, and student loans, provided the term and payment frequency are consistent.