Understanding Your Mortgage
An amortization schedule details each periodic payment on a loan, showing how much goes to interest and how much reduces the principal. Use this tool to visualize your payoff path and quantify the impact of prepayments.
How to Use the Calculator
- Enter Loan Details: Loan amount, annual interest rate, and term.
- Choose Payment Frequency: Monthly, bi-weekly, or weekly.
- (Optional) Add Prepayments: Monthly, yearly, or one-time.
- Calculate: Review the summary, chart, and downloadable schedule.
Summary and Amortization Schedule
Yearly points for readability. Hover to see exact values.
Detailed Amortization Schedule
| # | Principal | Interest | Remaining Balance |
|---|
Executive Insight: How to Think About Mortgages
1) Payment Structure & Interest Mechanics
Fixed-rate mortgages use declining balance amortization: early payments are interest-heavy while later payments are principal-heavy. The standard payment (PMT) solves for a level series that exactly retires the loan by maturity. Extra payments bring forward principal reduction, lowering interest accrual on all subsequent periods — a compounding effect in your favor.
2) APR vs. Nominal Rate
The quoted annual rate is nominal. APR incorporates certain fees and points, enabling apples-to-apples comparisons. When comparing lenders, evaluate both the payment and the total cost of capital across your expected holding period.
3) Frequency & Cash-Flow Design
Bi-weekly or weekly payments effectively increase payment count per year (26 / 52), trimming total interest. If your income arrives monthly, a pragmatic alternative is a fixed monthly prepayment that achieves a similar outcome with simpler budgeting.
4) Prepayment Strategy
- Hierarchy of capital allocation: First secure an emergency fund; then eliminate high-APR debt; then consider mortgage prepayment vs. investing.
- Rate regime: In high-rate environments, prepayments generate low-risk, rate-matched savings.
- Constraints: Check prepayment penalties and ensure liquidity buffers remain intact.
5) Refinance Economics (Break-Even)
A refinance makes sense when the present value of payment savings exceeds closing costs over your expected stay. Estimate a break-even horizon by dividing total costs by monthly savings, then stress-test with plausible selling or relocation timelines.
6) Sensitivity & Risk
Stress test for rate shocks (if ARM), income volatility, and home-value scenarios. Favor options that maintain resilience under adverse conditions rather than optimizing for a single point forecast.
Core Formulas (Reference)
PMT = P * r * (1 + r)^n / ((1 + r)^n − 1)
Where: P = principal, r = periodic rate (APR / payments per year), n = total number of payments
Interest_t = Balance_{t-1} * r
Principal_t = PMT − Interest_t − Extra_t
Balance_t = Balance_{t-1} − Principal_t
Further reading: Bank for International Settlements (BIS) on interest-rate transmission; U.S. CFPB on APR and mortgage disclosures; Investopedia’s amortization primer.