What the amortization calculator tells you
An amortization schedule is a month-by-month table that shows how each mortgage payment is split between interest and principal, and how your balance falls to zero over the life of the loan. Every payment is the same size, but the mix inside it changes every month.
Early in the loan, your balance is large, so most of the payment covers interest and little touches principal. As the balance drops, the interest portion shrinks and more of each payment goes to principal — which is why your balance falls slowly at first and quickly near the end.
Seeing the schedule helps you compare loans, plan extra payments, and understand the true cost of borrowing. On an off-market Miami purchase where you control the timeline, knowing your payoff math up front makes it easier to negotiate from strength.
How it works
- The fixed monthly payment is set so the loan reaches zero on schedule: M = L·r / (1 − (1 + r)^−n), where L is the loan amount, r is the monthly rate (annual rate ÷ 12), and n is the number of months.
- For each month, interest = current balance × (rate ÷ 12). This is the lender’s charge for that month.
- Principal for the month = the fixed payment − that month’s interest. The principal portion is what actually reduces your debt.
- Subtract the principal from the balance and repeat for the next month. Because the balance is now smaller, next month’s interest is slightly lower and the principal portion slightly higher.
- Any optional extra monthly payment is applied straight to principal, so the balance falls faster and the loan pays off before the original term — saving interest.
Frequently asked questions
What is an amortization schedule?
An amortization schedule is a table listing every mortgage payment over the loan’s life, showing how much of each goes to interest, how much to principal, and the remaining balance afterward. The payment amount stays constant, but the split shifts toward principal over time. It lets you see total interest paid and the exact payoff date.
How is mortgage interest calculated each month?
Each month’s interest equals your current balance multiplied by the monthly interest rate, which is the annual rate divided by 12. For example, a $300,000 balance at 7% has a monthly rate of about 0.583%, so the first month’s interest is roughly $1,750. The rest of your payment reduces the principal.
Why does most of my early payment go to interest?
Interest is charged on the outstanding balance, and early in the loan that balance is at its highest. With most of the payment consumed by interest, only a small slice reduces principal. As the balance falls month after month, the interest charge shrinks and the principal portion grows, so the loan pays down faster toward the end.
How much interest will I pay over 30 years?
It depends on the loan amount and rate, but on a 30-year fixed mortgage you often pay roughly as much in interest as the original loan. For example, a $300,000 loan at 7% costs about $1,996 a month and totals around $418,000 in interest over 30 years. A shorter term or extra payments cut that figure sharply.
How do extra payments affect amortization?
Extra money applied to principal reduces the balance immediately, so every future month’s interest is calculated on a smaller number. This compounds in your favor: even a modest extra amount each month can shave years off the term and save tens of thousands in interest, because you skip the interest that balance would have generated.
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