Mortgage Amortization Calculator (2023)

Frequently Asked Questions

What is a mortgage?

A mortgage is a type of loan you use to buy a home or to refinance your existing home. By getting a mortgage, you do not need to pay the entire price of the property in one full payment but agree to make payments on that loan for a set number of years until the value of the home is paid off.

How to get a mortgage?

A mortgage can be obtained through a financial institution such as a bank, credit union, or specialized mortgage lender. You can get pre-qualified for a mortgage or apply at a time you are ready to buy. The lender will check your credit score and history and employment history to make their decision.

How much mortgage can I afford?

Determining how much mortgage you can afford depends on a variety of factors such as your income, expenses, credit history, and existing debt. By taking into account all of those numbers, you can easily calculate how much of a mortgage payment you can afford at your current income.

What is mortgage insurance?

Mortgage insurance is an insurance policy that is designed to protect the lender if the borrower is not able to meet their contractual obligations of making regular payments or defaults on a loan. The private mortgage insurance offsets the losses the lender might face and reduces risk.

(Video) Mortgage Calculator With Extra Payment

What are the points on a mortgage?

Points are fees paid to a lender upfront in exchange for a lower interest rate on your mortgage loan. The lender agrees to reduce the closing costs of purchasing the property in exchange for a higher interest rate. If you purchase “discount points” your closing costs will be higher, but the interest rate lower for the life of the loan.

How to calculate a mortgage payment?

There is a complex formula that allows you to calculate your mortgage loan. The formula is as follows:
M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]
M= Mortgage
P= Principal amount
I= Monthly interest rate (yearly rate divided by 12 months)
N= Number of monthly payments for the duration of the loan (15 years x 12 months = 180 payments)
We recommend using a mortgage calculator to easily calculate your mortgage payment.

What is a jumbo mortgage/loan?

A jumbo mortgage, commonly referred to as a jumbo loan, is used to finance amounts higher than the conventional loan limit. The amount financed is higher than the loan limit set by the Federal Housing Finance Agency.

How to pay off a mortgage faster?

There are quite a few ways in which one can pay off their mortgage earlier than their set loan date. One of the most obvious ways is paying a higher amount on your mortgage than has been calculated and therefore reducing the amount of interest you pay in the long run. Another way to pay off a mortgage faster is to make your loan payment bi-weekly, resulting in an additional payment in a year.

(Video) Amortization Schedule Explained

What is an FHA loan?

An FHA loan is a mortgage loan that is insured by the Federal Housing Association. An FHA loan allows for individuals to close on a property with a down payment as low as 3.5%. FHA loans are considered a type of federal assistance for first time and returning home buyers.

What is a home equity loan?

A home equity loan uses the value of your current property as collateral. A home equity loan is issued as a lump-sum and is determined based on the current value of your home. The value is decided by an appraiser from the lending institution your loan will be provided by.

What is a conventional loan/mortgage?

A conventional loan is not backed by a government agency such as the FHA and is in turn solely provided by a private lender. This loan is not insured by the government and therefore may have stricter qualification requirements.

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Home Price

The home price is the cost of the property that the homebuyer decides to purchase. Home price varies by location, size of the home, and land, as well as the quality of the home and improvements made to the property. Home prices also fluctuate with the real estate market. The price of the house will determine the mortgage loan amount as well as the down payment.

Down Payment

A down payment is a percentage of the value of the home that is made upfront in a lump-sum cash payment. The down payment when purchasing a home varies depending on the price of the home and the financial ability of the homebuyer to pay. The standard down payment percentage is 20%, however, certain loans allow for a down payment much lower than that, in some cases as low as 0% (VA Loan) or 3.5% (FHA Loan).

Interest Rate

Interest rate, also known as a mortgage rate, is the rate of interest that is charged on the mortgage. The interest rate on a home loan can be fixed or variable, fluctuating with the current mortgage rates. Mortgage rates will vary for each borrower as they are heavily influenced by the homebuyer’s credit profile. As mortgage rates fluctuate with the real estate market, you can refinance your loan at a lower interest rate at a point in the loan term.

Loan Term

The loan term is the number of years you will be making your monthly mortgage payments towards your loan. The loan term may change during the loan life depending on whether the buyer decides to refinance the loan, make additional payments, or make more than the minimum monthly payment. Loan terms depend on the lender, interest rate, and the preference of the home buyer.

Property Taxes

Property taxes are paid by the owner of a home or property and are collected by the local government to fund services such as law enforcement, highway construction, and education. Property taxes are based on the value of the property including the land. Property taxes are calculated by the local government where the home is located.

(Video) Mortgage Amortization Calculation | HP 12c & 10bII Tutorials

Home Insurance

Home insurance is a type of property insurance that covers the losses and potential damages that your residence may face. The homeowner insurance, similarly to car insurance, provides liability coverage in case of an accident that may impact the residence or property. This type of insurance covers both the exterior damage to the property as well as damage to the interior and assets such as furniture. Home insurance is not the same thing as Private Mortgage Insurance and they serve different functions.

HOA Fees

Homeowners Association Fee, typically referred to as HOA fee, is a sum of money paid monthly by homeowners in certain types of properties such as condominiums and townhouse residences. These fees are collected to offset the cost of maintaining the building, facilities, and common areas such as a pool or fitness center. Some HOA fees even cover garbage disposal and utilities such as water and sewer fees. HOA is also required to have reserved funds for emergency high-cost expenses such as roof repair or potential property damage from a natural disaster.


If the buyer decides to put down less than the standard 20% down payment recommended, they are required to purchase Private Mortgage Insurance (PMI). Private mortgage insurance is a percentage of the loan amount. When a buyer decides to have a down payment lesser than 20% the loan to value ratio is higher than 80%, therefore presenting a higher risk for the lender. PMI reduces that risk for the lender. Homeowners are required to have PMI until they pay off 20% of the value of the property.

LTV (Loan-To-Value)

Loan-To-Value is an assessment of lending risk that lenders use to determine whether or not they will approve the mortgage loan for a potential home buyer. Loan assessments with higher LTV ratios are considered higher risk and may include higher interest rates for the homebuyer. Lower LTV means that a higher down payment was made and therefore the risk of the buyer defaulting on the loan is lower, resulting in lower interest rates. LTV is calculated by taking the mortgage amount and dividing it by the appraised property value.


The principal is the actual balance of the loan excluding any interest payments, taxes, or insurance. It is the original amount that was borrowed from the lender and had interest applied to it as well as other costs of borrowing such as taxes and PMI. The principal will be the amount of money you must pay until the loan is completely paid off, however, due to the amortization schedule, the initial payments are directed towards the interest before they are to the principal.


Interest is the number one cost of borrowing and is calculated at a percentage of the principal amount of the loan. Due to the fact that interest compounds, the majority of the initial payments are applied towards the interest rather than the principal balance. This causes homebuyers to apply extra payments to their loan, to decrease the compounding of the interest and reduce the sum of the loan they will pay.

(Video) How To Calculate Your Monthly Mortgage Payment Given The Principal, Interest Rate, & Loan Period


Principal, interest, property taxes, and home insurance (PITI) are the sum four components of a monthly mortgage payment. Together they make up what homebuyers would traditionally refer to as their mortgage. PITI is used by both borrowers and lenders to determine the affordability of a property for the homebuyer. If the PITI amount is considered too high when compared to the monthly household income, the borrower is considered high credit risk and may not be approved for the mortgage loan.


How do you calculate mortgage amortization? ›

Starting in month one, take the total amount of the loan and multiply it by the interest rate on the loan. Then for a loan with monthly repayments, divide the result by 12 to get your monthly interest. Subtract the interest from the total monthly payment, and the remaining amount is what goes toward principal.

How do I calculate amortization? ›

How to Calculate Amortization of Loans. You'll need to divide your annual interest rate by 12. For example, if your annual interest rate is 3%, then your monthly interest rate will be 0.25% (0.03 annual interest rate ÷ 12 months). You'll also multiply the number of years in your loan term by 12.

How does amortization work on a 30-year mortgage? ›

Maybe you have a 30-year fixed-rate mortgage. Amortization here means that you'll make a set payment each month. If you make these payments for 30 years, you'll have paid off your loan. The payments with a fixed-rate loan, a loan in which your interest rate doesn't change, will remain relatively constant.

What is Best amortization period for mortgage? ›

The most common amortization is 25 years. If you have at least a 20% down payment, however, you can go higher—up to 30 years, and sometimes longer. Shorter amortizations are also available. Their benefit is helping you accumulate home equity faster.

What is a 10 year term with 25 year amortization? ›

If you have a 10 year term, but the amortization is 25 years, you'll essentially have 15 years of loan principal due at the end.

What does 10 year term 30 year amortization mean? ›

The interest rate is fixed for the first 120 payments (10 years). After 10 years, the interest rate will be adjusted to our current 30-year fixed rate, not to exceed 3% above the introductory rate, but not less than the initial interest rate.

What is the most common amortization method? ›

The straight-line amortization, also known as linear amortization, is where the total interest amount is distributed equally over the life of a loan. It is a commonly used method in accounting due to its simplicity.

How do you calculate amortized monthly payments? ›

To calculate amortization, start by dividing the loan's interest rate by 12 to find the monthly interest rate. Then, multiply the monthly interest rate by the principal amount to find the first month's interest. Next, subtract the first month's interest from the monthly payment to find the principal payment amount.

Is paying off a 30 year mortgage in 15 years worth it? ›

Refinancing from a 30-year, fixed-rate mortgage into a 15-year fixed-rate note can help you pay down your mortgage faster and save lots of money on interest, especially if rates have fallen since you bought your home. Shorter mortgages also tend to have lower interest rates, resulting in even more savings.

Is a 15-year mortgage amortized over 30 years? ›

It's Really a 15-year Loan

Amortization is the process by which the balance of the loan decreases over the life of the mortgage. A 30/15 loan is only 15 years, but the payments are based on a 30 year loan. However, this results in a large portion of the principal being due at the end of the 15 years.

What happens if I pay an extra $500 a month on my 30 year mortgage? ›

Making extra payments of $500/month could save you $60,798 in interest over the life of the loan. You could own your house 13 years sooner than under your current payment. These calculations are tools for learning more about the mortgage process and are for educational/estimation purposes only.

Is it better to get 5 year or 2 year fixed mortgage? ›

Fixed means the mortgage payments are set at the same level. 2 or 5 year fixed mortgage refers to the period you want to set the payments over. Generally, the longer you set the fixed period the higher the mortgage interest rate but this will depend on the economic outlook.

What are the three types of amortization? ›

Similar to what obtains for the depreciation of tangible assets, there are three primary methods of amortization: the straight-line method, the accelerated method, and the units-of-production method.

What are the four types of amortization? ›

Amortization Schedules: 5 Common Types of Amortization
  • Full amortization with a fixed rate. ...
  • Full amortization with a variable rate. ...
  • Full amortization with deferred interest. ...
  • Partial amortization with a balloon payment. ...
  • Negative amortization.
23 Aug 2021

What is better 25 or 30-year amortization? ›

You'll save on interest with a 25-year amortization because you're paying off your mortgage in 25 years instead of 30 years. By paying off your mortgage five years sooner, you could potentially save yourself thousands in mortgage interest.

What is better 10 year ARM or 30-year fixed? ›

A 10/1 ARM is usually between 0.25% to 0.5% less expensive than a 30-year fixed-rate mortgage. Why? Because rates are lower when you borrow for a shorter period of time.

What is the difference between mortgage term and amortization? ›

The mortgage term is the length of time that the mortgage agreement at your agreed interest rate is in effect. The amortization period is the length of time it will take to fully pay off the amount of the mortgage loan.

What happens if I pay 2 extra mortgage payments a year? ›

Making additional principal payments will shorten the length of your mortgage term and allow you to build equity faster. Because your balance is being paid down faster, you'll have fewer total payments to make, in-turn leading to more savings.

Can you pay off an amortized loan early? ›

Paying off an amortizing loan early can save you from having to pay future interest. However, some lenders include an early payoff penalty in the loan contract since an early payoff will cause the lender to lose out on interest. Should I Pay It Off Early? It can be beneficial to pay off amortizing loans early.

Is it better to have a longer amortization? ›

As a shorter amortization period results in higher regular payments, a longer amortization period reduces the amount of your regular principal and interest payment by spreading your payments over a longer period of time. So you could qualify for a higher mortgage amount than you originally anticipated.

What is the formula to calculate mortgage? ›

These factors include the total amount you're borrowing from a bank, the interest rate for the loan, and the amount of time you have to pay back your mortgage in full. For your mortgage calc, you'll use the following equation: M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1].

What is an example of amortization? ›

What Is an Example of Amortization? A company may amortize the cost of a patent over its useful life. Say the company owns the exclusive rights over a patent for 10 years, and the patent is not to renew at the end of the period.

Which three methods are used to calculate amortized cost? ›

There are generally three methods for performing amortized analysis: the aggregate method, the accounting method, and the potential method.

What is the longest amortization? ›

The amortization period is the length of time it takes to pay off a mortgage in full. The amortization is an estimate based on the interest rate for your current term. If your down payment is less than 20% of the price of your home, the longest amortization you're allowed is 25 years.

How can I lower my mortgage amortization? ›

How to reduce your mortgage amortization
  1. Make extra payments: Although you have a 12-month schedule, making 13 plus payments can potentially shave years off your loan. ...
  2. Refinance your loan: Down the line, you may be able to refinance for lower interest rates.

Which is better amortization or simple interest? ›

If you are looking for a loan with a lower APR, a simple interest loan may be better. However, if you are looking for a long-term loan or the ability to make extra payments without penalty, then an amortized loan may be the better choice.

Can I make my own amortization schedule? ›

You can build your own amortization schedule and include an extra payment each year to see how much that will affect the amount of time it takes to pay off the loan and lower the interest charges.

What is the Excel formula for amortization? ›

Enter the corresponding values in cells B1 through B3. In cell B4, enter the formula "=-PMT(B2/1200,B3*12,B1)" to have Excel automatically calculate the monthly payment. For example, if you had a $25,000 loan at 6.5 percent annual interest for 10 years, the monthly payment would be $283.87.

What is fully amortizing monthly payment? ›

A fully amortized payment is one where if you make every payment according to the original schedule on your term loan, your loan will be fully paid off by the end of the term. The word amortization simply refers to the amount of principal and interest paid each month over the course of your loan term.

At what age should your house be paid off? ›

You should aim to have everything paid off, from student loans to credit card debt, by age 45, O'Leary says. “The reason I say 45 is the turning point, or in your 40s, is because think about a career: Most careers start in early 20s and end in the mid-60s,” O'Leary says.

Is it smart to pay off your house early? ›

Paying off your mortgage early can save you a lot of money in the long run. Even a small extra monthly payment can allow you to own your home sooner. Make sure you have an emergency fund before you put your money toward your loan.

Is it smart to pay off your house? ›

Paying off your mortgage early can be a wise financial move. You'll have more cash to play with each month once you're no longer making payments, and you'll save money in interest. Making extra mortgage payments isn't for everyone, though. You may be better off focusing on other debt or investing the money instead.

Is it better to get a 15-year mortgage or a 30-year and pay it off early? ›

If your aim is to pay off the mortgage sooner and you can afford higher monthly payments, a 15-year loan might be a better choice. The lower monthly payment of a 30-year loan, on the other hand, may allow you to buy more house or free up funds for other financial goals.

How can I pay off a 30-year mortgage in 10 years? ›

How to Pay Your 30-Year Mortgage in 10 Years
  1. Buy a Smaller Home. Really consider how much home you need to buy. ...
  2. Make a Bigger Down Payment. ...
  3. Get Rid of High-Interest Debt First. ...
  4. Prioritize Your Mortgage Payments. ...
  5. Make a Bigger Payment Each Month. ...
  6. Put Windfalls Toward Your Principal. ...
  7. Earn Side Income. ...
  8. Refinance Your Mortgage.
8 Aug 2021

Why is a 15-year mortgage worse? ›

You could face a higher risk of foreclosure

If you have higher monthly payments to make, it can be harder to come up with the money during times of financial trouble. As a result, the risk of foreclosure is greater with a 15-year loan than with longer-term loans with lower required monthly payments.

How many years does 2 extra mortgage payments take off? ›

Over the course of the year, you will have paid the additional month. Doing so can shave four to eight years off the life of your loan, as well as tens of thousands of dollars in interest. However, you don't have to pay that much to make an impact.

When should you not pay extra on your mortgage? ›

If you haven't started saving for retirement yet, or you're not maxing out your retirement savings accounts, it's a good idea to prioritize that over making extra mortgage payments. Your money will grow by leaps and bounds in these retirement accounts while, at the same time, your house will be appreciating in value.

Is it better to pay a little extra on mortgage monthly or yearly? ›

Making an extra mortgage payment each year could reduce the term of your loan significantly. The most budget-friendly way to do this is to pay 1/12 extra each month. For example, by paying $975 each month on a $900 mortgage payment, you'll have paid the equivalent of an extra payment by the end of the year.

Will mortgage rates climb in 2022? ›

If you're looking to buy a house in 2022, keep in mind that the Fed has signaled it will continue to raise rates, and mortgage rates could increase as the year goes on.

Will rates go down 2023? ›

How high will mortgage rates go in 2023? The experts we polled expect average 30-year mortgage rates to land anywhere between 5.0% and 9.31% in 2023 — a huge potential range. Predictions fall between 4.5% and 8.75% for the 15-year fixed mortgage rate.

Is it better to go for a 20 year or 30-year mortgage? ›

Get the shortest loan term you can afford

A shorter loan term (for example, 20 years) means higher repayments, but you'll pay less in interest. A longer loan term (for example, 30 years) means lower repayments, but you'll pay more in interest.

What are the disadvantages of amortization? ›

Drawbacks of Amortization

The main drawback of amortization is that the borrower sometimes does not realize how much he/she is actually paying in interest. It is important to determine the total amount of interest paid and not just look at what the fixed repayment amount is.

What is the benefit of amortized loan? ›

One of the main good points about amortized loan setups is that they offer a clear, set monthly payment to the borrower. The amortized loans are also often easier to track, since the payment amount for each month is a given, where irregular payments could cause a lot of confusion.

What is the best amortization? ›

The most common amortization is 25 years. If you have at least a 20% down payment, however, you can go higher—up to 30 years, and sometimes longer. Shorter amortizations are also available. Their benefit is helping you accumulate home equity faster.

How do you calculate monthly amortization on a home loan? ›

Starting in month one, take the total amount of the loan and multiply it by the interest rate on the loan. Then for a loan with monthly repayments, divide the result by 12 to get your monthly interest. Subtract the interest from the total monthly payment, and the remaining amount is what goes toward principal.

What is the mortgage calculation formula? ›

r = Annual interest rate (APRC)/12 (months) P = Principal (starting balance) of the loan. n = Number of payments in total: if you make one mortgage payment every month for 25 years, that's 25*12 = 300.

What is the mathematical formula for mortgage payment? ›

These factors include the total amount you're borrowing from a bank, the interest rate for the loan, and the amount of time you have to pay back your mortgage in full. For your mortgage calc, you'll use the following equation: M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1].

What is the formula for mortgage interest calculation? ›

How Is My Interest Payment Calculated? Lenders multiply your outstanding balance by your annual interest rate, but divide by 12 because you're making monthly payments. So if you owe $300,000 on your mortgage and your rate is 4%, you'll initially owe $1,000 in interest per month ($300,000 x 0.04 ÷ 12).

What is amortization with example? ›

What Is an Example of Amortization? A company may amortize the cost of a patent over its useful life. Say the company owns the exclusive rights over a patent for 10 years, and the patent is not to renew at the end of the period.

How do you calculate monthly payments on a loan? ›

How to Calculate Monthly Loan Payments
  1. If your rate is 5.5%, divide 0.055 by 12 to calculate your monthly interest rate. ...
  2. Calculate the repayment term in months. ...
  3. Calculate the interest over the life of the loan. ...
  4. Divide the loan amount by the interest over the life of the loan to calculate your monthly payment.

How do I use Excel to calculate mortgage payments? ›

To figure out how much you must pay on the mortgage each month, use the following formula: "= -PMT(Interest Rate/Payments per Year,Total Number of Payments,Loan Amount,0)". For the provided screenshot, the formula is "-PMT(B6/B8,B9,B5,0)".

How is home loan calculated with example? ›

For example, If a person avails a loan of ₹10,00,000 at an annual interest rate of 7.2% for a tenure of 120 months (10 years), then his EMI will be calculated as under: EMI= ₹10,00,000 * 0.006 * (1 + 0.006)120 / ((1 + 0.006)120 - 1) = ₹11,714. Calculating the EMI manually using the formula can be tedious.

How do you manually calculate a loan payment? ›

Here's how you would calculate loan interest payments. Divide the interest rate you're being charged by the number of payments you'll make each year, usually 12 months. Multiply that figure by the initial balance of your loan, which should start at the full amount you borrowed.

How do you calculate mortgage interest per year? ›

But if you'd like to understand how to figure it out on your own, read on. First, take your principal loan balance of $100,000 and multiply it by your 6% annual interest rate. 6 The annual interest amount is $6,000. Divide the annual interest figure by 12 months to arrive at the monthly interest due.


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