Amortization Calculator

An amortization calculator shows you exactly how your loan gets paid down over time and reveals the powerful impact of making extra payments.

What is an Amortization Calculator?

An amortization calculator shows you exactly how your loan gets paid down over time and reveals the powerful impact of making extra payments. When you take out a mortgage or any installment loan, you’re not just paying it off evenly each month—there’s a specific pattern to how each payment gets divided between interest and principal. Understanding this pattern and knowing how to manipulate it with extra payments can save you tens of thousands of dollars.

This calculator does more than just show your monthly payment. It maps out your entire loan journey, demonstrating how much interest you’ll pay over the loan’s life and how dramatically that changes when you add extra money to your payments. Whether you’re considering throwing an extra $100 toward your mortgage each month, making a yearly lump sum payment, or applying a windfall like a tax refund, the calculator shows exactly how much you’ll save and how much faster you’ll own your home free and clear.

The real value comes from seeing multiple scenarios side by side. What if you paid an extra $200 monthly? What about a $5,000 one-time payment in year three? The calculator answers these questions with precision, helping you make strategic decisions about where your money creates the most value.

Understanding What Information to Enter

The calculator needs details about your loan and any extra payments you’re planning:

Loan Amount – The total amount you’re borrowing. For a mortgage, this is typically your home price minus your down payment. Enter the principal you’ll actually be financing.

Interest Rate – Your annual percentage rate (APR). This is the rate your lender quoted you. Make sure you’re using the actual rate on your loan documents, not an estimated or promotional rate that might change.

Loan Term – How many years you’ll take to repay the loan under the standard schedule. Most mortgages are 15 or 30 years, though other terms exist. This is what your loan would be without any extra payments.

Extra Monthly – Any additional amount you plan to add to your regular payment every single month. This is the most powerful strategy because it compounds quickly—every extra dollar goes straight to principal, reducing next month’s interest charge. Even $50 or $100 monthly makes a significant difference over decades.

Extra Yearly – A lump sum you plan to pay once per year. Many people use tax refunds, work bonuses, or annual windfalls for this purpose. The calculator applies this amount every 12 months (typically in December), showing how yearly extra payments accelerate payoff.

One-Time Amount – A single extra payment you’re planning to make at a specific point. Maybe you’re expecting an inheritance, a work bonus, or proceeds from selling something. Enter the amount here.

Applied at Month – Which month you’ll make that one-time payment. If you’re planning to make it in year 2, you’d enter month 24. If it’s happening in 5 years, that’s month 60. This lets you see the impact of timing—paying extra early in the loan saves more interest than paying the same amount later.

How the Amortization Calculator Works

The calculator processes your loan using standard amortization mathematics, then compares the baseline scenario to what happens with your extra payments:

Step 1: Calculate Your Base Monthly Payment

First, it determines your required monthly payment using the standard formula:

Monthly Payment = P × [r(1+r)ⁿ] / [(1+r)ⁿ − 1]

Where P is your loan amount, r is your monthly interest rate (annual rate ÷ 12), and n is the total number of months. This payment stays constant throughout the loan term.

Step 2: Run the Baseline Scenario

The calculator simulates your entire loan with no extra payments, tracking:

• Each month’s interest charge (balance × monthly rate)
• Each month’s principal reduction (payment − interest)
• The declining balance after each payment
• Total interest paid over the entire loan

This establishes your baseline: what happens if you just make the required payments for the full term.

Step 3: Simulate With Extra Payments

Now it runs the loan again, but this time it adds your extra payments:

For each month:

1. Calculate interest on the current balance
2. Apply your regular payment
3. Add any extra monthly payment
4. Add yearly extra if it’s the 12th, 24th, 36th month, etc.
5. Add the one-time payment if this is the specified month
6. All extra money goes directly to principal
7. Reduce the balance by total principal paid
8. Track cumulative interest

This continues until the balance hits zero, which happens much sooner than the original term.

Step 4: Compare the Scenarios

The calculator subtracts the results:

• Months Saved = Original term − Accelerated payoff time
• Interest Saved = Baseline interest − Actual interest paid
• Time to Freedom = When you make your final payment with extra payments

Understanding Your Results

The calculator presents several numbers that tell your complete payoff story:

Monthly Payment – Your base required payment that covers principal and interest. This number doesn’t change even when you’re making extra payments—the extras are on top of this amount.

Payoff Time – How long it’ll actually take to pay off the loan with your extra payment strategy. The calculator shows this in years and months, and if you’re making extra payments, it also displays how much time you’re shaving off the original term.

Total Interest – Every dollar of interest you’ll pay with your current extra payment strategy. This is dramatically lower than what you’d pay with just the minimum payments, and watching this number drop as you experiment with different extra payment amounts is eye-opening.

Interest Saved – This is the money that stays in your pocket instead of going to the lender. It’s the difference between what you’d pay in interest with no extra payments versus what you’ll actually pay. This number appears in green when you’re saving money, making it clear you’re winning. For many homeowners, these savings exceed $50,000 or even $100,000.

Total Cost – Your complete financial obligation combining principal and actual interest paid. This shows what the house truly costs you when you factor in financing, and it’s substantially less when you’re making extra payments.

Visual Breakdown – The pie chart shows your principal versus total interest paid. With standard payments, the interest slice is usually shockingly large—sometimes nearly as big as the principal. Add extra payments and watch that interest slice shrink dramatically.

Why Extra Payments Create Such Dramatic Savings

The magic of extra payments comes from how amortization works. In your first payment on a 30-year mortgage, you might pay $1,500 in interest and only $400 toward principal. That $400 is all you’ve reduced your debt. But if you add $200 extra, now you’ve paid $600 toward principal—a 50% increase in debt reduction for only 13% more money.

That extra $200 means next month’s interest calculation happens on a balance that’s $200 lower. You save about $1 in interest next month (at 6% annual rate). That doesn’t sound like much, but it compounds. The month after, you save $1 again, plus a little more because your balance is even lower. Over 30 years, that single $200 payment saves you over $600 in interest.

Now multiply that by every month you make extra payments. An extra $200 monthly on a $300,000 mortgage at 6.5% for 30 years saves roughly $85,000 in interest and cuts 6+ years off your loan. You’re making 318 payments instead of 360 and saving a fortune.

The one-time payment feature shows another powerful strategy. A $10,000 extra payment in year 5 of that same mortgage saves about $26,000 in interest over the loan’s life. The earlier you make it, the more you save, because you’re reducing interest charges for more years.

Strategic Use of This Amortization Calculator

Before refinancing to a lower rate, run this calculator with extra payments on your current loan. Sometimes, keeping your existing loan and simply paying extra saves more money than refinancing with all its costs and fees.

When you get a raise, use the calculator to see what happens if you direct that extra income toward your mortgage. A $300 monthly raise applied to your mortgage might cut 8 years off your loan and save $70,000.

Considering different loans? Calculate a 15-year versus 30-year mortgage, then see what happens if you take the 30-year loan but pay extra to match the 15-year timeline. You get the flexibility of the lower required payment, but the benefits of faster payoff.

The calculator empowers you to transform theoretical strategies into concrete numbers. You’ll stop wondering “should I pay extra?” and start knowing “if I pay $X extra, I save $Y and finish Z years sooner.” That clarity drives better financial decisions and keeps you motivated as you watch your payoff date get closer every time you make an extra payment.