Amortization Calculator

About the Amortization Calculator

The loan calculator tells you what the payment is. This one tells you what the payment is doing, which is a more surprising question than it sounds.

The payment never changes. What it is made of changes completely — from almost all interest at the start to almost all principal at the end — and nearly every counterintuitive thing about long-term borrowing follows from that one fact. Why halfway through a mortgage is not halfway through the debt. Why a small overpayment in year two is worth several times the same money in year twenty. Why the total cost is so much larger than the rate alone suggests.

This calculator builds the schedule year by year and puts those answers in front of you.

How to Use the Amortization Calculator

Enter the amount borrowed, the annual rate and the term in years.

Leave the extra payment at zero to see the plain schedule. Put something in it to see what happens — and the answer is usually larger than people expect.

The working below the result is the schedule itself: one row per year, showing what you paid, how much of it was interest, how much came off the balance and what was left.

How Amortization Works

Each month, two things happen in order.

Interest is charged on the balance. At 6% a year on £250,000 that is £1,250 in month one.

Whatever is left of the payment reduces the balance. The payment is £1,498.88, so £248.88 comes off the debt.

Next month the balance is fractionally smaller, so the interest is fractionally smaller, so slightly more of the same payment reaches the principal. Repeat 360 times and the composition inverts entirely.

That is all amortization is. Everything below is a consequence of it.

The Payment Formula

             r
  P = A × ─────────
          1 − (1+r)⁻ⁿ

The formula finds the single fixed payment that clears the balance in exactly n months. It is solved once, at the start, and then never referred to again — every row of the schedule is just "charge interest, subtract the rest".

At a zero rate the denominator is zero, so that case is handled separately: the payment is the amount shared equally across the months.

The Schedule, Year by Year

£250,000 at 6% over 30 years, £1,498.88 a month:

Every one of those years costs the same £17,986.56. In year one, £14,916 of it is interest. In year thirty, £571 is.

After fifteen years — half the term — £177,621 of the original £250,000 is still owed. You have paid £269,798 and reduced the debt by £72,379.

The Halfway Point

The balance does not reach half until payment 252: twenty-one years in, 70% of the way through the term.

The rate decides how lopsided this is:

At a zero rate it would be payment 181 — dead centre, give or take the rounding. Every month past that is interest bending the curve.

What an Overpayment Actually Does

This is where amortization stops being a curiosity and starts being money.

An extra payment is not merely a payment made early. It removes a piece of balance that would otherwise have accrued interest for the entire remaining term. In year two of a thirty-year loan, that is 336 months of interest that never happens.

At £200 a month you put in £53,400 of overpayments and save £86,232 of interest. You get back more than you put in — which is not a trick, it is what compounding looks like running in your favour for once.

Step-by-Step Example

£250,000 at 6% over 30 years.

  Monthly rate:  6% ÷ 12 = 0.5%
  Payments:      30 × 12 = 360

  Payment = 250,000 × 0.005 ÷ (1 − 1.005⁻³⁶⁰)
          = 1,250 ÷ 0.834137
          = 1,498.88

Month 1:

  Interest:  250,000 × 0.5% = 1,250.00
  Principal: 1,498.88 − 1,250.00 = 248.88
  Balance:   249,751.12

Month 2 charges interest on £249,751.12 rather than £250,000 — £1,248.76 — so £250.12 comes off instead of £248.88. That £1.24 difference is the entire engine, compounding 360 times.

  Total paid:     539,593.37
  Total interest: 289,593.37   (116% of what was borrowed)
  Final payment:  1,495.45

Understanding Your Result

The monthly payment is the level figure, with the overpayment separated out if you entered one.

Interest is the total and its size relative to what you borrowed. At 6% over 30 years the interest exceeds the loan.

Total paid includes the final payment, which is deliberately a few units different — see below.

The halfway point is the payment at which the balance reaches half, and how far through the term that is.

Worth knowing carries the overpayment comparison, or, if you did not enter one, why you might want to.

A note on the final payment

Every payment is rounded to the smallest unit, and 360 roundings leave a little drift. A schedule built naively ends with a stray balance of a few pence; real lenders adjust the final payment to settle exactly. This one does the same, which is why the last row is £1,495.45 rather than £1,498.88 and the balance lands on zero. It is also why the yearly principal in the table sums to exactly £250,000.

When Should You Use This Calculator?

Before fixing a term. Seeing the year-by-year interest makes the cost of a longer term concrete in a way a single total does not.

Deciding whether to overpay. The table above is the argument, and the saving is usually several times what people guess.

Checking a lender's statement. If your balance does not match the schedule, the difference is fees, a payment date convention, or a rate change — and it is worth asking which.

Working out what you actually own. Halfway through a mortgage you own far less of the property than the years suggest, which matters when you come to sell or remortgage.

Understanding an offer to refinance. Restarting a schedule puts you back at the interest-heavy end of the curve, which a lower rate has to overcome before it saves anything.

Common Mistakes

Assuming half the term means half the debt. It means about 30% of it at 6%. It is the single most common misreading of a long loan.

Judging a loan by the rate alone. 6% over 30 years costs more in interest than the amount borrowed. The rate and the term together decide the cost, not the rate.

Overpaying late rather than early. The same money in year two is worth several times what it is worth in year twenty-five. If you are going to overpay, the sooner it starts the better.

Refinancing without counting the reset. A lower rate on a fresh 30-year schedule can cost more than the old higher rate on a schedule already twenty years in.

Treating a yearly table as exact monthly reality. These rows are sums of twelve monthly charges. They are correct to the cent, but your statement dates and any interest-calculation convention your lender uses may shift individual months.

Forgetting early repayment charges. Some agreements penalise overpaying. Check before relying on any of the savings above.

Reading this as a quote. Every figure here is an estimate for planning, not an offer or financial advice.