Loan Amortization Calculator

The monthly payment is calculated using the standard amortization formula:

M = P × [r(1 + r)^n] / [(1 + r)^n - 1]

• M = Monthly payment
• P = Principal (loan amount)
• r = Monthly interest rate (annual rate / 12)
• n = Number of payments (years × 12)

This payment remains constant over the life of the loan (for fixed-rate loans).

Interest is calculated on the remaining balance. As you pay down the principal:

1. Each month, interest = remaining balance × monthly rate
2. The rest of your payment goes to principal
3. As balance decreases, interest portion decreases
4. More of each payment goes to principal

Example: $200,000 at 6%

• First payment: $1,000 interest, $199 principal
• Last payment: $6 interest, $1,193 principal

Extra payments go entirely to principal, saving you interest and shortening the loan term.

Example: $200,000 at 6% for 30 years

• Base: $231,676 total interest
• With $200 extra monthly: $145,089 interest
• Savings: $86,587 and 10.5 years!

Even small extra amounts make a big difference over time.

30-year mortgage:

• Lower monthly payments
• More flexibility in budget
• Much more interest paid overall
• Slower equity building

15-year mortgage:

• Higher monthly payments
• Significantly less total interest
• Faster equity building
• Forced savings discipline

Example: $300,000 at 6%

• 30-year: $1,799/month, $347,514 interest
• 15-year: $2,532/month, $155,793 interest
• Save $191,721 but pay $733 more monthly

• Mortgage: 15-30 years, 3-7%, secured by property
• Auto: 3-7 years, 3-8%, secured by vehicle
• Student: 10-25 years, 3-7%, various repayment options
• Personal: 2-7 years, 6-36%, usually unsecured

Make extra payments if:

• Interest rate is high (over 5-6%)
• You want guaranteed "return" (interest saved)
• You value peace of mind from being debt-free
• You have no higher-interest debt

Consider NOT making extra if:

• Interest rate is very low (under 3-4%)
• You can earn more investing elsewhere
• You need emergency fund or retirement savings
• You have higher-interest debt to pay first

Mortgage interest deduction:

• Can deduct interest on up to $750,000 of mortgage debt
• Must itemize deductions
• Reduces effective interest cost

Other housing costs (PITI):

• Property taxes
• Homeowner's insurance
• PMI (if down payment < 20%)
• HOA fees (if applicable)

Your true monthly housing cost includes all of these!