Mortgage Amortization Calculator

When you take out a mortgage, each monthly payment covers both principal and interest. In the early years, the majority of your payment goes toward interest because your outstanding balance is at its highest. As you pay down the principal, the interest portion shrinks and more of each payment goes toward reducing your balance.

This gradual shift from interest-heavy to principal-heavy payments is called amortization. A 30-year fixed-rate mortgage on a $360,000 loan at 6.75% has a monthly payment of about $2,335. In the first month, roughly $2,025 goes to interest and only $310 to principal. By year 15, the split is nearly even. By the final year, almost the entire payment reduces your balance.

Extra payments accelerate this process. Because extra payments go directly to principal, they reduce the balance that interest is calculated on. This creates a compounding savings effect — you pay less interest in every subsequent month. Even modest extra payments of $100-200 per month can save tens of thousands of dollars in interest and shorten your loan by several years.