Mortgage Amortization Calculator

Amortization Formula:

\[ PMT = PV \times \frac{r}{1 - (1 + r)^{-n}} \]

Monthly Payment (PMT):

Unit Converter ▲

Unit Converter ▼

From:	To:

1. What is Mortgage Amortization?

Amortization is the process of spreading out a loan into a series of fixed payments over time. Each payment consists of both principal and interest, with the interest portion decreasing and principal portion increasing over the life of the loan.

2. How Does the Calculator Work?

The calculator uses the amortization formula:

\[ PMT = PV \times \frac{r}{1 - (1 + r)^{-n}} \]

Where:

\( PMT \) — Monthly payment amount
\( PV \) — Present value or loan amount
\( r \) — Monthly interest rate (annual rate ÷ 12)
\( n \) — Total number of payments (term in years × 12)

Explanation: The formula calculates the fixed payment amount required to fully repay a loan over its term, accounting for compound interest.

3. Importance of Amortization Calculation

Details: Understanding your mortgage payment helps with budgeting, comparing loan options, and planning for the future. It shows how much goes toward principal vs. interest each month.

4. Using the Calculator

Tips: Enter the loan amount in USD, annual interest rate as a percentage (e.g., 3.5 for 3.5%), and loan term in years. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between interest rate and APR?
A: The interest rate is the cost of borrowing the principal, while APR includes additional fees and costs associated with the loan.

Q2: How can I pay off my mortgage faster?
A: Making extra principal payments or switching to biweekly payments can significantly reduce the loan term and total interest paid.

Q3: Why does most of my early payment go toward interest?
A: In the beginning, the outstanding balance is highest, so interest charges are largest. As the balance decreases, more of each payment goes toward principal.

Q4: Should I choose a 15-year or 30-year mortgage?
A: 15-year loans have higher payments but lower interest rates and total cost. 30-year loans have lower payments but higher total interest.

Q5: How does a down payment affect my mortgage?
A: A larger down payment reduces your loan amount, which lowers monthly payments and total interest, and may eliminate private mortgage insurance (PMI).