1. What is Mortgage Amortization?

Amortization is the process of spreading out a loan into a series of fixed payments over time. Each payment goes toward 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 standard amortization formula:

Where:

• \( M \) — Monthly payment
• \( P \) — Principal loan amount
• \( r \) — Monthly interest rate (annual rate ÷ 12)
• \( n \) — Total number of payments (loan term in years × 12)

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

3. Understanding Your Amortization Schedule

Details: The amortization schedule shows how each payment is split between principal and interest, and how the loan balance decreases over time. Early payments are mostly interest, while later payments are mostly principal.

4. Using the Calculator

Tips: Enter the loan amount, interest rate, loan term in years, and start date. The calculator will show your monthly payment and generate a complete amortization schedule.

5. Frequently Asked Questions (FAQ)

Q1: How does extra payment affect amortization?
A: Extra payments reduce the principal faster, decreasing total interest paid and potentially shortening the loan term.

Q2: What's the difference between interest rate and APR?
A: The interest rate is the cost of borrowing principal, while APR includes interest plus other loan fees.

Q3: Why does most of my early payment go to interest?
A: Interest is calculated on the outstanding balance, which is highest at the beginning of the loan.

Q4: Can I change my payment frequency?
A: This calculator assumes monthly payments. Biweekly or weekly payments would require adjustments to the formula.

Q5: How does refinancing affect amortization?
A: Refinancing resets the amortization schedule, typically with a new loan amount, rate, and term.