Loan Amortization Calculator

Amortization is the process of paying off a loan through regular, fixed monthly payments over a set period. Each payment is split between interest and principal. Early payments are mostly interest, while later payments are mostly principal. By the end of the term, the loan balance reaches zero.

In the early years of a loan, the outstanding balance is high, so a larger portion of each payment goes toward interest. As you pay down the principal, the interest portion shrinks and more of each payment goes toward reducing the balance. On a 30-year mortgage at 6.5%, roughly the first 18 years see more interest than principal in each payment.

Extra payments directly reduce your principal balance, which means less interest accrues each subsequent month. This creates a compounding savings effect. For example, on a $300,000 mortgage at 6.5% over 30 years, paying an extra $100 per month can save over $24,000 in interest and shorten the loan by more than 3 years.

Biweekly payments can save you money because you end up making 26 half-payments per year, which equals 13 full monthly payments instead of 12. That extra monthly payment per year goes directly toward principal and reduces both the loan term and total interest paid.

The principal portion accelerates as the loan matures because each payment reduces the outstanding balance, which lowers the interest charge. The crossover point where principal exceeds interest in each payment depends on the rate and term. For a 30-year loan at 6.5%, this typically happens around year 19.

Refinancing replaces your existing loan with a new one, resetting the amortization clock. While a lower interest rate can reduce monthly payments and total interest, extending the term may negate those savings. Closing costs also factor into the break-even period. Always compare the remaining cost of your current loan with the new loan's total cost.