Loan Payoff & Amortization Schedule Calculator

The fixed-payment formula

Every fixed-rate loan - mortgage, auto or personal - is governed by a single piece of algebra: the amortization formula. It answers one question: what constant monthly payment retires a principal over a fixed term at a fixed rate, leaving nothing owed at the end?

Worked example: borrow $320,000 at 6.25% APR for 30 years and the formula returns about $1,970 a month. Multiply by 360 payments and you repay roughly $709,000 - about $389,000 of it interest. The payment never changes; what changes is how it is divided between interest and principal - that split is where all the strategy lives.

Why early payments are mostly interest

Interest is charged on what you currently owe, recalculated monthly: balance × r. In month one of the example, the balance is the full $320,000, so the first month’s interest is about $1,667 of a $1,970 payment. Barely $300 touches the debt itself - the rest is the cost of money already spent.

The arithmetic bends in your favor as you go. Every dollar of principal retired shrinks next month’s interest charge, freeing a little more of the same fixed payment for principal. The shift starts slowly, then turns decisive: on this loan, the crossover where principal overtakes interest doesn’t arrive until around payment 227 - two-thirds of the way through the term. That is why the balance line falls gently for years, then collapses.

Reading the schedule

The amortization schedule is your loan rendered row by row. Each line answers one question: with this month’s payment, where does the money go, and what remains?

• Payment - total cash due that month: your scheduled payment plus any extra you have set.
• Principal - the slice that actually reduces the debt. It is the only part that builds equity.
• Interest - that month’s cost of borrowing: the outstanding balance multiplied by the monthly rate.
• Balance - what you still owe after the payment posts. Notice how little it moves in year one.

Because the table applies your extra payment, it won’t match the lender’s official minimum schedule: the loan retires sooner, each later payment carries a heavier principal share, and the final row is a smaller partial payment.

The quiet power of extra payments

Prepaying works because of an asymmetry: a scheduled payment is split between principal and interest, but an extra dollar carries no interest at all. It lands entirely on principal, and a dollar retired early stops accruing interest thereafter. A rough intuition:

1. Round up to the next comfortable hundred - $1,970 becomes $2,000, painlessly trimming months.
2. Add one extra payment a year. Biweekly plans do this automatically: 26 half-payments equal 13 monthly ones.
3. Recast before you refinance. A recast re-amortizes your balance for a small fee while keeping your rate and term.
4. Target high-APR debt first. Extra dollars on a 22% credit card save far more than on a 6% mortgage.
5. Check for prepayment penalties, and instruct your servicer in writing to apply extras to principal - not to next month’s bill.

A mortgage is one line in a larger plan. Model how fast investing could buy back your freedom in the FIRE calculator, and what you would need to earn to fund it with the freelance rate calculator.