Amortization Calculator: Schedule & Payoff

Amortization Strategy: Winning the Long Game Against Interest

Master the strategic insights that separate homeowners who build wealth from those who enrich their lenders. These principles reveal why timing and tactics matter more than raw payment amounts.

Strategic Amortization Insights

The Front-Loading Wealth Transfer

•Your lender designed the amortization schedule—not you.

•In year 1 of a 30-year mortgage, approximately 86% of your payments go to interest. You're essentially "renting" the money while calling yourself a homeowner. After 5 years of payments on a $400,000 loan, you've paid $150,000 but only reduced principal by ~$25,000. The bank received $125,000.

The $1 Early vs. $1 Late Multiplier

•The same dollar has wildly different impact depending on when you pay it.

•A $1,000 extra payment in year 1 saves approximately $2,500 in interest over the loan term. The same $1,000 payment in year 20 saves only ~$200. This 12x difference explains why front-loading extra payments is critical—and why waiting "until you have more money" costs you.

The Bi-Weekly Illusion

•Bi-weekly payments work, but not for the reason most people think.

•The magic isn't the "frequency"—it's the math: 26 half-payments = 13 full payments (not 12). You're simply paying one extra month per year. You can achieve the identical effect by adding 1/12 of your payment to each monthly payment. Banks offering "bi-weekly programs" often charge setup fees for this simple trick.

The Refinance Break-Even Trap

•Refinancing resets your amortization clock—sometimes costing more than it saves.

•If you refinance a 30-year loan at year 8 into a new 30-year loan, you restart the front-loading cycle. Even if your rate drops 1%, you may pay more total interest because you're back to paying 85%+ interest per payment. Calculate break-even months before refinancing.

Amortization Calculator: Complete 2026 Loan Payoff & Interest Savings Guide

Free amortization calculator with month-by-month payment schedules. How to calculate mortgage payment and amortization formula. Extra payment modeling, bi-weekly acceleration. Trusted by borrowers. No sign-up—all calculations run locally.

How Loan Amortization Works: Complete Formula Guide

The Amortization Formula Explained

Monthly Payment Formula:

$M = P \times \frac{i(1+i)^n}{(1+i)^n - 1}$
where M = monthly payment, P = principal (loan amount), i = monthly interest rate (annual rate ÷ 12), n = total number of payments (years × 12)
Example Calculation:

$400,000 loan at 6.5% for 30 years: i = 0.065 ÷ 12 = 0.005417, n = 360 payments. M = $400,000 × [0.005417(1.005417)³⁶⁰] / [(1.005417)³⁶⁰ – 1] = $2,528.27/month.
Interest Portion Formula:

$\text{Interest}_{\text{month}} = \text{Balance} \times i$
Each month's interest is calculated on the current remaining balance. As balance decreases, interest decreases and more payment goes to principal
Principal Portion Formula:

$\text{Principal}_{\text{month}} = M - \text{Interest}_{\text{month}}$
Whatever remains after interest is applied to principal reduction. This is why the principal portion grows over time as interest shrinks
Scope & Limits:

Standard amortization formulas for fixed-rate loans. Extra payment modeling assumes principal-only application. All calculations run in your browser; no data is sent to servers. Verify with a qualified professional before making significant mortgage or loan decisions.

Amortization calculates fixed payments that fully repay a loan over a set term. Each payment covers that month's interest plus a portion of principal. The formula ensures the loan reaches zero at the final payment.

Understanding the Payment Split Over Time

Year 1 Payment Allocation ($400K at 6.5%):

Monthly payment: $2,528. First payment: $2,167 interest (86%) + $361 principal (14%). After 12 payments, you've paid $30,339 but only reduced principal by $4,449. The lender received $25,890 in interest.
Year 15 Payment Allocation:

Same $2,528 payment, but now: $1,264 interest (50%) + $1,264 principal (50%). You've reached the "tipping point" where principal and interest are equal.
Year 30 Payment Allocation:

Final payment: $14 interest (0.5%) + $2,514 principal (99.5%). Nearly all of your payment now builds equity. Total interest paid over 30 years: $510,177 on a $400,000 loan.

The amortization schedule reveals how each payment is allocated between principal and interest throughout the loan term.

Extra Payment Strategies: Detailed Savings Analysis

Extra Monthly Payments: Impact Calculator

+$100/month Extra:

Total interest: $465,000 (saves $45,000). Payoff: 25.5 years (saves 4.5 years). Effective return: 6.5% guaranteed on every extra dollar.
+$200/month Extra:

Total interest: $428,000 (saves $82,000). Payoff: 22.3 years (saves 7.7 years). Monthly cash flow increase after payoff: $2,728 ($2,528 + $200 you were paying extra).
+$500/month Extra:

Total interest: $340,000 (saves $170,000). Payoff: 16.8 years (saves 13.2 years). You'll own your home free and clear in half the original term.
Key Insight:

Extra payments must be applied to principal only, not "future payments." Some lenders apply extra payments incorrectly—verify your statement shows principal reduction, not advance payment credit.

Consistent extra monthly payments compound their effect over time. Here's the exact impact on a $400,000 loan at 6.5% for 30 years (standard total interest: $510,177).

Lump Sum Payment Timing Analysis

$10,000 in Year 1:

Interest saved: $24,800. Time saved: 14 months. Every dollar saves $2.48 in future interest because it stops compounding for 29 years.
$10,000 in Year 10:

Interest saved: $12,100. Time saved: 11 months. Still valuable, but only 20 years of compound prevention remain.
$10,000 in Year 20:

Interest saved: $4,200. Time saved: 8 months. Only 10 years of interest savings, and the balance is already much lower.
Strategic Timing:

If choosing between paying $10,000 in year 1 vs. investing it, your mortgage rate is the guaranteed return rate. At 6.5%, you'd need consistent 6.5%+ investment returns to beat the mortgage paydown.

One-time lump sum payments have dramatically different impacts depending on when they're made. Here's the same $10,000 payment at different points.

Bi-Weekly Payment Mathematics

The Math:

26 bi-weekly payments ÷ 2 = 13 monthly payment equivalents per year. You're making one extra full payment annually. On a $2,528 payment, that's $2,528 extra principal per year.
Savings on $400K at 6.5%:

Total interest: $420,000 (saves $90,000). Payoff: 24.6 years (saves 5.4 years). Equivalent to paying $211 extra monthly ($2,528 ÷ 12).
DIY Alternative:

Add 1/12 of your payment ($211 on a $2,528 payment) to each monthly payment. Achieves identical results without bi-weekly program fees. Some banks charge $300-$500 for bi-weekly "enrollment."
Cash Flow Consideration:

Bi-weekly means 26 payments per year vs. 12 monthly. Two months per year will have 3 payment withdrawals instead of 2. Ensure your budget can handle the irregular cash flow.

Bi-weekly payments are popular but often misunderstood. Here's exactly how they work and whether you should use them.

Loan Term Comparison: 15 vs. 20 vs. 30 Year Analysis

Term Length Trade-Offs on a $400,000 Loan at Current Rates

30-Year Fixed (6.5% rate):

Monthly payment: $2,528. Total interest: $510,177. Total paid: $910,177. Best for: maximizing cash flow, investing the difference, uncertain income.
20-Year Fixed (6.25% rate):

Monthly payment: $2,922 (+$394/month). Total interest: $301,280. Total paid: $701,280. Saves $208,897 vs. 30-year. Best for: balanced approach, stable income.
15-Year Fixed (5.875% rate):

Monthly payment: $3,349 (+$821/month). Total interest: $202,820. Total paid: $602,820. Saves $307,357 vs. 30-year. Best for: high earners, aggressive wealth building.
The Hidden Benefit:

15 and 20-year loans typically have rates 0.25-0.75% lower than 30-year loans. This rate difference compounds the savings beyond just the shorter term.

Shorter terms have lower rates and dramatically less total interest, but higher monthly payments. Here's the complete comparison.

PMI Elimination: Complete Strategy Guide

PMI Thresholds and Cancellation Rules

Automatic Termination (78% LTV):

PMI automatically cancels when your loan balance reaches 78% of the original purchase price, based on the original amortization schedule. No action required—but this may take 10-11 years on a 30-year loan.
Borrower-Requested Cancellation (80% LTV):

You can request cancellation at 80% LTV through principal paydown. You must be current on payments with good payment history. Some lenders require written request; others have online forms.
Appraisal-Based Cancellation:

If your home has appreciated significantly, a new appraisal can establish higher value, lowering your LTV. If original LTV was 90%+, you typically need 75% current LTV. Appraisals cost $400-$600.
PMI Cost Impact:

PMI typically costs 0.5-1% of loan amount annually. On $400,000: $2,000-$4,000/year ($167-$333/month). Eliminating PMI 5 years early saves $10,000-$20,000. Factor this into your extra payment strategy.

Private Mortgage Insurance protects the lender (not you) when your down payment is below 20%. Understanding the rules helps you eliminate it faster.

FAQ

? What is loan amortization?

Amortization is the process of paying off a loan through fixed monthly payments that cover both principal and interest. Each payment stays the same, but the split changes over time: early payments are mostly interest (because the balance is highest), while later payments are mostly principal as the balance decreases.

? How do I calculate my monthly mortgage payment?

Use the formula: M = P × [i(1+i)^n] / [(1+i)^n – 1], where M = monthly payment, P = loan principal, i = monthly interest rate (annual rate ÷ 12), and n = total number of payments. For a $400,000 loan at 6.5% for 30 years: i = 0.065/12 = 0.00542, n = 360, M = $2,528/month.

? What is the principal tipping point?

The tipping point is when your monthly principal payment first exceeds your interest payment. For a 30-year mortgage at 6.5%, this occurs around year 10-12. Before this point, most of your payment benefits the lender; after, most builds your equity. Understanding this helps explain why early extra payments are so powerful.

? How much can I save with extra principal payments?

On a $400,000 loan at 6.5% for 30 years: Extra $100/month saves ~$45,000 and cuts 4-5 years. Extra $200/month saves ~$75,000 and cuts 7-8 years. A $10,000 lump sum in year 1 saves ~$25,000 in interest. Earlier payments save more because they reduce the balance that accrues interest for longer.

? Should I pay down my mortgage or invest?

Compare your mortgage rate to expected investment returns. If your rate exceeds 6-7%, paying down principal is a guaranteed return at that rate. If rates are lower (3-4%), investing in diversified funds (historically 7-10% returns) may yield more over time. Consider risk tolerance: mortgage payoff is guaranteed; investment returns are not.

? When can I cancel PMI on my mortgage?

PMI automatically cancels at 78% loan-to-value (LTV) based on the original schedule. You can request early cancellation at 80% LTV through principal paydown or home appreciation (may require appraisal). On a $400,000 home with 10% down, reaching 80% LTV saves $150-$300/month in PMI costs.

Amortization Calculator: Interest-Efficiency Model

Loan Infrastructure

Early Payoff Strategy

The Principal Tipping Point

Visualizing the "Interest Drag"

Amortization Schedule