Free Amortization Calculator 2026

What Is Amortization?

Amortization is the process of spreading a loan into a series of fixed payments over time. Each payment covers two things:

• Interest — The cost of borrowing money (based on the remaining balance)
• Principal — Reducing the actual amount you owe

In the early years, most of your payment goes to interest. As the balance decreases, more goes to principal. This is why extra payments early in the loan save the most money.

How Amortization Works on a $300K Mortgage

Here's a year-by-year breakdown of a $300,000 mortgage at 6.5% for 30 years ($1,896/month):

• Year 1: $22,744 interest / $3,975 principal — 85% of payments go to interest!
• Year 5: $21,044 interest / $5,675 principal
• Year 10: $18,175 interest / $8,544 principal
• Year 15: $14,429 interest / $12,290 principal
• Year 20: $9,427 interest / $17,292 principal
• Year 25: $4,361 interest / $22,358 principal
• Year 30: $713 interest / $26,006 principal — almost all principal

Total paid: $682,633 ($300,000 principal + $382,633 interest). You pay more in interest than the house cost!

Extra Payments: Save Thousands and Years

Adding even a small extra payment each month can dramatically reduce total interest and pay off your loan years early:

• $100 extra/month: Saves ~$45,000 interest, pays off 3.5 years early
• $200 extra/month: Saves ~$82,000 interest, pays off 6 years early
• $500 extra/month: Saves ~$140,000 interest, pays off 11 years early
• 1 extra payment/year: Saves ~$40,000 interest, pays off 4 years early

Best strategy: Make extra payments in the early years when they have the biggest impact. Every extra dollar reduces the balance that future interest is calculated on.

2026 Amortization by Loan Type

• 30-year mortgage at 6.5%: $300K loan → $682K total ($382K interest = 127% of principal)
• 15-year mortgage at 5.8%: $300K loan → $470K total ($170K interest = 57% of principal)
• 5-year auto loan at 7%: $30K loan → $35.6K total ($5.6K interest = 19% of principal)
• 3-year personal loan at 10%: $15K loan → $17.4K total ($2.4K interest = 16% of principal)
• 10-year student loan at 6%: $30K loan → $40K total ($10K interest = 33% of principal)

Key insight: Longer terms and higher rates mean dramatically more total interest. A 30-year mortgage at 6.5% costs 2.3x the loan amount.

Amortized vs Interest-Only Loans

• Amortized loan: Each payment covers both interest and principal. The loan is fully paid off by the end of the term. This is how most mortgages, auto loans, and personal loans work.
• Interest-only loan: You pay only interest for a set period (typically 5-10 years). The principal doesn't decrease. After the interest-only period, payments jump significantly or you owe a balloon payment.

Why interest-only is risky: On a $300K interest-only loan at 6.5%, you pay $1,625/month for 10 years ($195,000 total) and still owe the full $300K. If home values decline, you could owe more than the home is worth.

When to Refinance Based on Amortization

• Early in the loan (years 1-7): Most payments went to interest. Refinancing at a lower rate can save a lot, but you restart the amortization clock. Consider a shorter term to avoid paying more total interest.
• Middle of the loan (years 8-20): More of your payment goes to principal. Run the numbers — a rate drop of 0.75-1% usually makes sense if you'll stay 2-3+ years.
• Late in the loan (years 20-30): Most payment goes to principal. Refinancing rarely makes sense — you'd restart paying mostly interest. Better to make extra payments instead.

The refinance rule of thumb: Recoup closing costs within 2-3 years. Closing costs are typically 2-5% of the loan amount ($6,000-15,000 on a $300K refinance).