1. What is a Mortgage Amortization Calculator?

Definition: This calculator shows how each payment is split between principal and interest over the life of a loan, and provides a complete repayment schedule.

Purpose: It helps borrowers understand how much of their payment goes toward the loan principal versus interest, and how the loan balance decreases over time.

2. How Does the Calculator Work?

The calculator uses these formulas:

Where:

• \( I_k \) — Interest portion of payment k (USD)
• \( P_k \) — Principal portion of payment k (USD)
• \( B_k \) — Remaining balance after payment k (USD)
• \( r \) — Monthly interest rate (decimal)
• \( M \) — Monthly payment amount (USD)

Explanation: Each payment first covers the interest due on the remaining balance, then the remainder reduces the principal.

3. Importance of Amortization

Details: Understanding amortization helps borrowers see the true cost of loans, plan for refinancing, and make informed decisions about extra payments.

4. Using the Calculator

Tips: Enter the loan amount, annual interest rate, and loan term in years. The calculator will show your monthly payment and complete repayment schedule.

5. Frequently Asked Questions (FAQ)

Q1: Why does early payment go mostly toward interest?
A: Since interest is calculated on the current balance, early payments when the balance is highest have more interest.

Q2: How can I pay less interest overall?
A: Make extra principal payments to reduce the balance faster and shorten the loan term.

Q3: What happens if I make biweekly payments?
A: Making half-payments every two weeks (26 payments/year) can significantly reduce interest and pay off the loan faster.

Q4: Does this work for all loan types?
A: This calculator is for fixed-rate loans. Adjustable-rate mortgages require different calculations.

Q5: How accurate is this calculator?
A: It provides standard amortization calculations, but actual loans may include fees or slight variations.