How loan amortisation works
Amortisation is the process of paying off a loan through a series of equal, regular payments, structured so the balance reaches exactly zero on an agreed date. It applies to any loan repaid this way: mortgages, car finance, personal loans, student loans. This calculator works the amortisation formula for any of them, then simulates every single payment to build the schedule, rather than just quoting the monthly figure. If it is specifically a house purchase, the Mortgage Calculator adds price and deposit on top; for a plain fixed-payment loan without the full payment-by-payment schedule, the Loan Calculator is quicker.
Every payment does two jobs: it covers the interest owed on the current balance, then whatever is left over reduces the balance itself. The payment amount is fixed for the whole term, but the split inside it is not, because interest is charged only on what is still outstanding. One formula sets that fixed payment:
Take the calculator's own defaults: $200,000 borrowed at 6% APR over 30 years, so n is 360 monthly payments and r is 0.5% a month. The formula returns $1,199.10 a month. The first payment is $1,000.00 of interest, exactly half a percent of the full $200,000 balance, and $199.10 of principal. Over the full 360 payments that comes to $431,676 paid in total, $231,676 of it interest on top of the $200,000 borrowed. Set the rate to zero and the formula collapses to a plain amount ÷ term, with no interest column at all, which the calculator also handles correctly.
Reading the schedule: annual summary and monthly detail
The amortisation schedule above lists every single payment: its date, the payment amount, how much of it was principal, how much was interest, and the balance left afterwards. For a 30-year loan that is 360 rows, too many to scan usefully in one long list, so the schedule is shown two ways. The year-by-year table gives the totals for each 12-payment block: what was paid, the interest and principal shares, and the balance at the end of that year. Underneath, each year collapses into its own expandable section; open one and every payment inside it appears with its exact date and running balance, useful for checking a specific month against a real statement or lining a remortgage or refinance date up with where the balance actually sits.
The final payment is deliberately not a clean multiple of the regular one. Because the fixed payment is rounded to the cent while the true balance is not, the last row absorbs whatever small amount is left so the balance finishes at exactly zero rather than a few cents overdrawn or in credit, which is also how real loan servicing handles the last instalment.
The crossover point: when principal overtakes interest
Because interest is charged only on the balance still outstanding, it is largest in the first payment, when the balance is largest, and it falls a little every month as the balance falls. Principal is whatever is left of the fixed payment after interest is deducted, so it grows as interest shrinks. Early on, most of a payment is interest; later, most of it is principal. This gradual flip is the whole mechanism of amortisation, and it has one exact turning point: the crossover payment, the first one where the principal slice is larger than the interest slice.
On the calculator's default loan, $200,000 at 6% over 30 years, that crossover lands at payment 223 of 360, in month 223 counting from the first payment, close to but after the halfway point of the term by payment count, because payments near the start carry so much more interest than payments near the end. Before payment 223, interest has the bigger share of every payment; from payment 223 onward, principal does. The chart above plots principal paid and interest paid for every year of the term, and the two lines cross at exactly this point. A shorter term or a lower rate moves the crossover earlier, because either one raises the payment relative to the interest charged on the same balance; a longer term or a higher rate moves it later.
What an extra monthly payment actually buys
An extra amount paid on top of the required payment goes straight onto the balance, after that month's interest is covered, so it never earns interest itself and it shortens every month that follows. On the calculator's default loan, an extra $200 a month clears it 9 years early and saves about $79,800 in interest, a large saving for a payment increase of under a fifth of the original amount, because it removes balance while there are still decades of interest left to charge on it. The same extra amount paid in the final few years of the same loan would save only a small fraction of that, since so little balance and so little remaining interest are left by then. The "Extra payments" table above runs the standard schedule and the extra-payment schedule side by side using your own numbers, with the new payoff date and the interest saved shown directly.
Most lenders allow some overpayment without a penalty, often up to around 10% of the outstanding balance a year, particularly during a fixed-rate deal; going further can trigger an early repayment charge on some products. The loan agreement, or a direct question to the lender, is the only reliable source for what a specific loan allows.
Choosing the term and the start date
The term is entered as years and months rather than one figure, since a real offer sometimes runs a few months either side of a round number, for example when a completion date shifts a mortgage's first payment. The optional first-payment month and year only change which real calendar dates appear against each row of the schedule; they do not change the payment amount, the total interest or the crossover point, all of which depend only on the amount, the rate, the term and any extra payment. Leaving the date as today is fine if only the figures matter, not the calendar.
Questions people ask
What is amortisation, in plain terms?
It is paying off a loan through equal regular payments, where each one covers the interest due on the balance so far and puts whatever is left toward reducing that balance, until it reaches zero on the agreed date. The word also describes the resulting schedule: the payment-by-payment record of how the balance falls to zero.
Why is my first payment mostly interest?
Interest is charged only on the balance still outstanding, and the balance is at its largest on the very first payment. As the balance falls a little each month, the interest charged on it falls too, so the same fixed payment buys more and more principal as the term goes on. This is normal for every amortising loan, not a sign of a bad deal.
What is the crossover point?
It is the first payment where the principal slice becomes larger than the interest slice. Before it, more of each payment goes to interest; after it, more goes to principal. On a typical long-term loan it lands somewhere past the midpoint of the term by payment count, because the early payments are so interest-heavy. This calculator works it out exactly and marks it on the chart and in the schedule.
Does an extra payment always go against the principal?
On a standard amortising loan, yes: the lender still takes that month's interest first, then anything paid beyond the required payment reduces the balance directly, exactly as this calculator assumes. Some loans apply extra payments differently, for example to a future instalment instead of the balance, so it is worth confirming with the lender that an overpayment is applied to principal straight away rather than held against next month's payment.
Why does the last payment in the schedule look different?
The regular payment is a rounded figure, but the true balance rarely reaches exactly zero on that rounding. The final payment is adjusted up or down by a small amount so the balance finishes at precisely zero rather than leaving a residual few cents owed or overpaid, which is how real loan servicing handles the last instalment too.
Does changing the start date change the payment or the interest?
No. The start month and year only set which real calendar date appears against each row of the schedule. The payment amount, the total interest and the crossover payment all come from the amount borrowed, the rate, the term and any extra payment, none of which the start date affects.
Is this the same as a mortgage calculator?
The underlying formula is identical, but this tool works from the loan amount directly rather than a house price and deposit, and its focus is the full payment-by-payment schedule rather than affordability or rate comparisons. For a house purchase with price and deposit fields, the Mortgage Calculator is the more direct tool; for a quick payment and term comparison without the full schedule, try the Loan Calculator.
This calculator gives an estimate for a standard fixed-rate, fixed-term amortising loan and is not financial or lending advice. Real repayment schedules depend on the exact agreement, fees, payment dates and the lender's own rounding and accounting practices. Check the credit agreement or ask the lender directly before making a decision.