Mortgage Amortization Calculator

What is Mortgage Amortization?

Mortgage amortization is the process of paying down the principal of a mortgage loan at the same time you pay the interest on that loan. This process allows you to slowly increase the amount you pay toward the principal and decrease the amount you pay in interest over the life of the loan. That way, at the end of the term, you own the home free and clear without any outstanding debts. The monthly payment you make each month remains constant, but as the principal decreases, the amount of interest required decreases as well. You can use a mortgage amortization table to chart those changes. 

What is an Amortization Schedule?

An amortization schedule is a chart that shows how the amortization process is working on a mortgage loan. With most conventional mortgage loans, the payments you make at the beginning of the term are weighted more heavily toward paying the interest. But over time, as the principal decreases, the interest decreases also, and a larger percentage of your monthly payment will go toward the former. An amortization schedule charts this process, so you know how much you still owe and how much you’ve paid to the lender.

How Do I Calculate My Amortization Schedule?

To calculate your amortization schedule:

1. Take your interest rate, and multiply it by the principal.
2. Divide that by 12 to see what you owe every month.
3. Take your monthly mortgage payment and subtract your monthly interest to find out how much principal you’ll pay the first month.
4. Repeat that process for each month over the loan term, and you will have your amortization schedule.

How Do You Amortize Example:

Remaining principal: $100,000
Interest rate: 5%
Monthly payment: $536.82
Loan type: 30-year fixed-rate mortgage

1. $100,000 x 5% = $5,000 in interest
2. $5,000 / 12 = $416.67 in interest for the first month
3. $536.82 – $416.67 = $120.15 in principal

Month 1: Payment - $536.82 Interest: $416.67 Principal: $120.15
To fill out the next month, subtract the amount of principal paid in the first month from the original balance and repeat the same process.

1. $100,000 - $120.15 = $99,879.85 in remaining principal
2. $99,879.85 x 5% = $4993.99 in interest
3. $4993.99 / 12 = $416.17 in interest for the first month
4. $536.82 - $416.17 = $120.66 in principal

Month 1: Payment - $536.82 Interest: $416.67 Principal: $120.15
Month 2: Payment - $536.82 Interest: $416.17 Principal: $120.66

You can continue that formula for the duration of the loan to fill out the full amortization schedule. As you can see, the percentage of the monthly payment going toward interest decreases over time, while the amount going toward the principal increases. This has been simplified for explanatory purposes and will get more complex with adjustable rates and longer terms.

How Many Years Will Come Off My Mortgage by Paying Extra?

It depends on how much extra you pay. The more you pay toward the principal, the more it will reduce the amount of interest you owe each month. If you’re able to make a substantial payment toward the principle that far exceeds your monthly payment, you could knock several years off the loan. For instance, in the above example, you could shave over 4 years off your mortgage by making biweekly mortgage payments rather than monthly payments because you’d be able to pay down the principal quicker and accumulate less interest.  

What’s 30-year Amortization?

30-year amortization means that the loan will be fully amortized after 30 years. Meaning that after 30 years you will have paid off all the principal plus interest if you are making the necessary monthly payments. This is typical of conventional 30-year fixed-rate mortgages.

Is it Smart to Pay Extra Principal on a Mortgage?

Yes, if you can afford it. The sooner you pay down the principal, the sooner you will own your home and the less interest you will end up paying in the long run. Don’t pay more than you can realistically afford, but it’s advantageous to pay down the principal early from a financial standpoint.