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Mortgage Amortization Calculator

# Mortgage Amortization Calculator

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Use our Mortgage Amortization Calculator to understand how your principal and interest payments change and how your mortgage balance gets paid off over time. Although the amortization formula used to calculate your payment never changes, the amortization schedule is unique for every loan based on the interest rate, mortgage length, loan amount and program. Our Mortgage Amortization Calculator uses these inputs to determine the principal balance and payment breakdown for any loan.

Watch our Mortgage Amortization Calculator "How To" video

## Inputs

Select mortgage type. The most common mortgage type is fixed rate
Indicates the size of mortgage you would like to obtain
The length, in years, of the mortgage. The most common mortgage term is 30 years
The current interest rate for a 30 year fixed rate mortgage is approximately 3.500%

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### How Our Mortgage Amortization Calculator Works

From a technical standpoint, amortization is based on a mathematical formula that calculates the exact monthly payment required to both pay your lender the interest they are due according to the terms of your mortgage while also paying off your mortgage balance in full over the course of your loan.

From a mortgage borrower's standpoint, amortization determines your monthly mortgage payment, and this is where the mathematical formula and practical application of amortization meet.  This is because your mortgage payment is comprised of both principal and interest and that composition changes a little with every payment, even though the payment you make to the lender never changes, which is one of the main advantages of a fixed rate loan.

For example, let's say your monthly mortgage payment is \$2,000. One month, that payment may consist of \$1,500 in interest and \$500 in principal.  The next month, your mortgage payment is still \$2,000 but the breakdown is \$1,475 in interest and \$525 in principal. The split between principal and interest gradually shifts over the course of your mortgage but your monthly payment remains the same.

Our calculator uses the following inputs to determine the amortization schedule for a mortgage:

Mortgage Type. You can select a fixed rate monthly mortgage or a bi-weekly mortgage to compare the amortization for different types of loans. You pay off a bi-weekly loan faster because you make the equivalent of an extra monthly payment each year.

Mortgage Amount. While your loan amount does not directly impact how your mortgage amortizes, a higher loan amount means you pay a higher monthly payment.

Mortgage Term.  This is the length of your mortgage.  The longer your mortgage, the more interest expense you pay and the flatter the amortization curve.

Interest Rate.  The higher your interest rate, the more interest you pay at the beginning of the mortgage and the steeper the amortization curve.  This is also why loans with higher mortgage rates require higher payments.

Our Amortization Calculator shows you your monthly payment and also produces a chart that shows you the split between principal and interest payments annually.  This amortization schedule also illustrates how this split changes as your principal balance gets paid down over the course of your loan.

As you can see from the chart, amortization does not work in a straight line, meaning that for a 30 year mortgage you have not paid off half of your mortgage at the halfway point of the loan, which is year 15.  In fact, depending on your mortgage rate and other factors it can take longer than 20 years to pay down half of the loan for a 30 year fixed rate mortgage.

Understanding how amortization works is important because it enables you to understand your loan balance over the course of your mortgage.  You can use this information to determine how much equity you have in your home which is useful if you are considering refinancing your mortgage or taking out a home equity loan.

Understanding the how your interest and principal payments change over time also has tax implications and means that your mortgage tax deduction is higher at the beginning of your loan and decreases over your loan term.

## What is Mortgage Amortization?

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### Amortization Works Differently for Different Types of Mortgages

Amortization for a fixed rate mortgage works differently than for an adjustable rate mortgage (ARM). With a fixed rate mortgage, the mortgage term used to determine the mortgage amortization schedule does not change over the life of the loan.  For example, the monthly mortgage payment for a 30 year fixed rate mortgage is always based on a 30 year mortgage term.  With an adjustable rate mortgage, the mortgage balance re-amortizes over the remainder of the mortgage term every time the interest rate adjusts.  For example, at the end of year 18 of an ARM, the monthly payment is based on the current loan balance, new interest rate and a twelve year loan term (because the mortgage has twelve years remaining).  While amortization is relatively straightforward for a fixed rate mortgage, borrowers should understand how it can impact the monthly payment for an ARM over the life of the loan.  With our Mortgage Amortization Calculator, you can select the type and length of mortgage you want to analyze.

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### Why Mortgage Amortization Matters

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While we pride ourselves on the quality and breadth of the FREEandCLEAR mortgage calculators please note that they should be used for informational purposes only. Our calculators rely on assumptions by us and inputs and assumptions provided by you, which may be inaccurate. The outputs from our calculators are estimates only and should not be used as the sole basis for making any financial decisions. Always consult multiple financial professionals when determining the mortgage size and program that is appropriate for you.

### More FREEandCLEAR Mortgage Resources

#### How Mortgage Amortization Works

Understand how mortgage amortization works and how the split between principal and interest that comprises your monthly payment changes over the course of your mortgage

#### What Length Mortgage Should I Choose?

Understand how the length of your mortgage affects your monthly payment and total interest expense over the life of your loan

#### Mortgage Rates

Compare mortgage rates and fees for top lenders near you.  Comparing multiple mortgage proposals is the best way to find the mortgage with the lowest rates and fees

#### Mortgage Expert

Got mortgage questions? We love answering them. Submit your mortgage questions and receive an informative response within 24 hours

Sources

"How does paying down a mortgage work?” CFPB. Consumer Financial Protection Bureau, August 5 2016. Web.