1. What is a Mortgage Loan Amortization Calculator?

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

Purpose: It helps borrowers understand their payment structure and how much interest they'll pay 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)
• \( M \) — Fixed monthly payment (USD)

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

3. Importance of Amortization

Details: Understanding amortization helps borrowers see how much equity they're building and the true cost of borrowing.

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 total interest.

5. Frequently Asked Questions (FAQ)

Q1: Why does most of my early payment go to interest?
A: Because interest is calculated on the current balance, which is highest at the beginning of the loan.

Q2: How can I pay less interest overall?
A: Make extra principal payments or choose a shorter loan term.

Q3: What's the difference between interest rate and APR?
A: APR includes fees and other loan costs, while the interest rate is just the cost of borrowing.

Q4: How does refinancing affect amortization?
A: Refinancing resets the amortization schedule, typically extending the time when most payments go to interest.

Q5: Can I see the full amortization schedule?
A: This calculator shows key metrics. For a full schedule, use our detailed Amortization Table tool.