Loan Amortization Explained: How a 30-Year Mortgage Actually Works

TL;DR — The Loan Calculator shows your monthly payment, total interest, full amortization schedule, and the impact of any extra payment — for any loan: mortgage, auto, student, personal. For interest-rate math use the Percentage Calculator; for "when will this be paid off" plans, the Date Calculator.

Why a $300K loan costs $600K

At 7% over 30 years, a $300,000 mortgage has a monthly payment of about $1,996. Over 360 months that’s $718,000 — meaning $418,000 of pure interest on top of the $300K you borrowed. That’s not predatory; it’s just compounding. The shorter the term and the lower the rate, the less of your money disappears.

How amortization actually works

An amortized loan keeps your monthly payment fixed, but the split between principal and interest shifts over time:

• Month 1 — almost all interest, tiny principal.
• Halfway through — roughly 50/50.
• Final months — almost all principal.

This is why an extra payment in year 1 has dramatically more impact than the same payment in year 25 — it skips the most interest-heavy months.

Year-1 sample (30-year, $300K @ 7%)

Month  Payment   Interest  Principal  Balance
1      $1,996    $1,750    $246        $299,754
6      $1,996    $1,742    $254        $298,289
12     $1,996    $1,733    $263        $296,431
60     $1,996    $1,672    $324        $286,054
180    $1,996    $1,233    $763        $210,650
360    $1,996    $12       $1,984      $0

Use the calculator in 60 seconds

1. Open the Loan Calculator.
2. Enter loan amount, annual interest rate, and term in years.
3. See the monthly payment, total interest, and total amount paid.
4. Toggle the amortization schedule for month-by-month breakdown.
5. Add an "extra monthly payment" and watch the payoff date jump forward.
6. Export the schedule to CSV for spreadsheet planning.

The four moves that save the most interest

1. Shorter term. Going from 30 → 15 years on a $300K mortgage at 7% saves ~$220,000 in total interest, but raises the monthly payment by ~$700.
2. One extra payment a year. Equivalent to 13 monthly payments instead of 12 — typically shaves 5+ years off a 30-year mortgage.
3. Biweekly payments. Same as one extra payment a year, easier to budget.
4. Refinance when rates drop. A 1% rate drop on a $300K loan saves ~$60K over 30 years — but only worth it if the break-even on closing costs is shorter than how long you’ll stay.

Loans this calculator handles

• Mortgages (fixed-rate) — 15, 20, 30 year.
• Auto loans — typically 3–7 year.
• Student loans (standard repayment) — 10–25 year.
• Personal loans — 1–7 year.
• Home equity loans / HELOC (in fixed-rate mode).

Adjustable-rate mortgages (ARMs) need additional modeling — use the fixed-rate calculation as a worst-case planning floor.

FAQ

What’s the formula for monthly mortgage payment?

M = P × [r(1+r)^n] / [(1+r)^n - 1] where P = principal, r = monthly rate (annual / 12), n = number of months. The calculator does this for you and shows the full schedule.

Is it better to pay extra principal monthly or yearly?

Monthly saves slightly more (the extra reduces principal sooner), but the difference is small. The bigger lever is the amount of extra principal, not the cadence.

How much can I save by switching from 30 → 15 year?

For a $300K loan at 7%: roughly $220K saved in interest. Monthly payment goes from ~$2,000 to ~$2,700.

Does the calculator include property tax and insurance?

It calculates principal + interest only (PI). Add property tax, insurance, HOA, and PMI separately — those vary by location.

Financial planning toolkit

• Loan Calculator — payment + amortization + extras.
• Percentage Calculator — interest, discounts, tips.
• Date Calculator — payoff dates and milestone planning.