FOA Tools

Amortization Calculator

Use our mortgage amortization calculator to see how much of your monthly payment will go towards principal and interest over the life of your loan.

Over {{user.details.loanTerm == "15"? "15":"30"}} years you'll pay:

Based on an estimated monthly payment of

$
%

Amortization schedule breakdown

Total principal payments:
Total interest payments:
DATE INTEREST PRINCIPAL BALANCE


Editor’s note: The above calculator is made available to you as an educational tool only, and calculations are based on information provided by you, the user. Any amount calculated is only an estimate. This is not an advertisement for the above terms, interest rates, or payment amounts. Finance of America Mortgage does not guarantee the applicability of the above terms in regards to your individual circumstances. Calculations may not take into account certain loan-specific costs, including but not limited to mortgage insurance, mortgage insurance premiums, funding fees, homeowners association fees, etc.

How does our amortization calculator work?

A mortgage amortization calculator breaks down how much interest and principal are covered with each monthly mortgage payment. It also tells you how much you’ll pay in interest over the course of your loan term (as scheduled).

Some financial amortization calculators can offer insight into the impact of additional payments or a larger down payment. You may also be able to see how much of your principal balance will remain at the end of each year, demonstrating how fast you’ll build equity in your home.

How to use Finance of America Mortgage’s amortization calculator

Using FAM’s amortization calculator above is simple and can help you find the right home loan for you. To see your personalized result, enter your:

  • Loan amount: Enter the amount of your home loan, not the purchase price of your house. You do not want to include your down payment in this section.
  • Loan term: Choose from 15-year fixed, 30-year fixed, and 5/1 ARM. Your loan term will affect how much you pay in interest for the life of the loan.
  • Interest rate: Fill in your exact interest rate for accurate calculations. Even a fraction of a percent will make a difference in how much you pay. If you haven’t purchased a home yet, keep the pre-filled rate in this box.

In the advanced report area, the calculator will show you how much of each monthly payment goes toward interest and principal, and how much your loan will cost overall. You’ll also see your loan’s remaining balance for each year of your loan term.

What is a loan amortization schedule?

While your principal and interest payments will stay the same with a fixed-rate loan, the portion of your payment that goes toward each component will shift over time as you pay down the balance.

Initially, most of your monthly payment goes toward interest during the first decade of your loan. At the same time, only a small portion goes toward paying down your loan balance, which means that you don’t begin to make a serious dent in your principal balance — or build much equity in your home — for many years.

Over time, though, your payment’s allocation will shift, with more and more going toward your principal and less going toward interest. This progression of your principal and interest payments happens according to your specific loan amortization schedule.

You’ll often be provided with an amortization schedule for your loan when you take out a home mortgage. This schedule includes loan details such as your:

  • Original loan amount
  • Loan term
  • Interest rate
  • Remaining loan balance
  • Principal contribution of your payment
  • Interest contribution of your payment
  • Start and end date

A mortgage calculator with amortization can also help you break down these costs to determine where your monthly payment is going, and when.

Amortization allows you to spread out the cost of your loan (i.e.: the interest paid to your lender) over time. It also lets your lender collect a larger portion of their fee upfront, in case you refinance your mortgage with another lender down the line.

Some lenders will provide you with an amortization schedule when you finalize your home loan. Others might only offer a payment schedule, though, which may or may not break down your principal and interest contributions.

How to find your monthly amortization payment

Whether you’re comparing different mortgage loan options or considering a refinance, there are times when you may need to know how to find a monthly payment and calculate interest on a loan.

The manual formula for finding your monthly amortized payment is:

A = P [{r(1+r)^n} / {(1+r)^n-1}]

A represents your periodic payment amount
P represents your principal balance, or the original loan amount
r represents your periodic interest rate
n represents the total number of periodic payments

So, let’s say you’re purchasing a home for $300,000 at an annual percentage rate (APR) of 3%. You take out a 30-year mortgage loan, so your loan period will be 360 months (since we’re calculating monthly payments, we’ll use the monthly term for this formula).

First, you’ll need to convert your interest rate into a periodic (in this case, monthly) rate, to match the rest of the calculation. Divide 0.03 (3%) by 12 (months) and you’ll get 0.0025. This is your monthly interest rate.

Now, plug all of those numbers into the equation to calculate your monthly payment amount.

A = (300,000) x [{ 0.0025 (1+0.0025)^360 } / { (1+0.0025)^360 -1 }]

Solving for A, you should get a monthly payment amount of $1,265.

Now, this tells you how much your lender’s monthly payment will be over the course of your 30-year loan term, but it doesn’t break down the actual amortization schedule. Doing this requires a little more manual work and is often done best with a spreadsheet.

Starting with your first monthly payment, we already know that the interest portion of your payment will be $750

How? Because your initial principal loan balance ($300,000) multiplied by your monthly interest rate (0.03/12=0.0025) equals $750. This means that $750 of that first payment goes straight toward interest while the remainder — or $515 — goes toward your principal balance.

  Starting principal balance Monthly interest rate (3% APR) Monthly payment Principal contribution Interest contribution Remaining principal balance
Month 1 $300,000 0.0025 $1,265 $515 $750 $299,485


At the beginning of month 2, your principal balance is $299,485. The amortized payment for month 2 can be calculated by inserting $299,485 for P into the original formula above.

  Starting principal balance Monthly interest rate (3% APR) Monthly payment Principal contribution Interest contribution Remaining principal balance
Month 1 $300,000 0.0025 $1,265 $515 $750 $299,485
Month 2 $299,485 0.0025 $1,265 $516 $749 $298,969
Month 3 $298,969 0.0025 $1,265 $517 $747 $298,452

 

You can continue plugging in your results (or let a spreadsheet do the work for you) to manually calculate your entire amortization schedule.

30-year vs. 15-year mortgage: How does amortization compare?

Deciding between a 30-year mortgage and a 15-year mortgage is tricky. You’ll need to consider your monthly budget and how much you can afford. You should also compare the interest rates for each term option, and how that will impact both your overall loan cost and your ability to build equity in the home.

Since a 30-year mortgage loan spreads your repayment out over a longer period of time, your monthly payments are lower than they would be for the same loan amount over 15 years. As a result, though, you will find that you are usually paying a lot more in overall interest. Your amortization schedule for the loan will also show that 30-year monthly payments are primarily interest for a longer period of time, before you begin really chipping away at the principal balance.

When choosing your mortgage options, you’ll want to consider the pros and cons of a fixed-rate loan versus an adjustable-rate mortgage (ARM). While the latter may offer you a lower interest rate initially, it also represents a bigger risk if rates increase before your home is paid off.

Down the line, you may decide that you want to refinance your mortgage, either to pay off the debt faster, reduce monthly payments, take on a lower interest rate, or all three. A refinance calculator can help you determine whether a mortgage refinance is the right move.

How can an amortization calculator help me?

  • An amortization calculator can help you determine the overall cost of your home mortgage loan.
  • It can also allow you to compare various loan types — such as a 15- or 30-year mortgage — and how they impact your total cost.
  • Amortization calculators enable you to see how small changes in interest rate can affect monthly payments and overall loan expense.
  • Using an amortization calculator allows you to see the total impact of additional monthly payments and/or a larger down payment at the beginning of your loan period.

Amortization calculator FAQs

What’s the difference between depreciation and amortization?
Depreciation represents the current value of an asset — in this case, your home. Over time, your home’s value may either increase (appreciate) or decrease (depreciate), which can affect your established equity (or your home’s value compared to how much you still owe on the property).

Amortization, on the other hand, represents your monthly payment and how that contributes to your current mortgage debt. Each month, your mortgage payments will go toward both interest for your lender and paying down your principal balance. Initially, more of your monthly payment goes toward interest while only a small portion goes toward principal; over time, though, this shifts until your payment is almost entirely going toward principal. Both amortization and depreciation can impact the equity you hold in your home, however, so there is some overlap.

How do you calculate an amortization schedule with a balloon payment?
A balloon payment is a loan repayment schedule that isn’t fully amortized. At the end of the loan period, the borrower will owe a larger final payment, called the balloon payment. In order to calculate the balloon payment, you’ll need to adjust your calculations for your lender’s terms. Insert the monthly interest rate being used to calculate your adjusted payment schedule, and calculate each payment down to the final balloon payment that remains.

How will making an extra payment affect my loan balance?
Making extra principal loan payments is a great way to pay off your home mortgage sooner and for less in total interest. When you make an extra payment, most lenders will apply that total contribution to your remaining principal balance. As a result, the interest calculated for the following month will be reduced, so even more of your regular payment will be applied to principal. Whether you make a full extra payment each year or contribute an extra $100 to your mortgage when you can, every bit will help save you money and get out of debt early.

How does amortization work on an adjustable-rate mortgage?
With an adjustable-rate mortgage, or ARM, your interest rate can change over time. Usually, this shift occurs at predetermined intervals, such as every 10 years or after a five-year introductory rate period. At that time, you will need to revise your amortization schedule to account for your new rate. This will allow you to see how much of your mortgage payment is going toward principal and interest with the new APR, how much your loan will cost you overall, and when your loan balance will be cleared.

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