Amortization Calculator (2024)

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Amortization Calculator (1)

Monthly Pay: $1,687.71

Total of 180 monthly payments$303,788.46
Total interest$103,788.46

Amortization schedule


YearInterestPrincipalEnding Balance
1$11,769.23$8,483.33$191,516.67
2$11,246.00$9,006.57$182,510.10
3$10,690.49$9,562.07$172,948.02
4$10,100.72$10,151.84$162,796.18
5$9,474.58$10,777.98$152,018.20
6$8,809.82$11,442.75$140,575.45
7$8,104.05$12,148.51$128,426.94
8$7,354.76$12,897.80$115,529.13
9$6,559.25$13,693.31$101,835.82
10$5,714.68$14,537.89$87,297.94
11$4,818.01$15,434.55$71,863.38
12$3,866.04$16,386.52$55,476.86
13$2,855.36$17,397.21$38,079.66
14$1,782.34$18,470.23$19,609.43
15$643.13$19,609.43$-0.00

While the Amortization Calculator can serve as a basic tool for most, if not all, amortization calculations, there are other calculators available on this website that are more specifically geared for common amortization calculations.

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What is Amortization?

There are two general definitions of amortization. The first is the systematic repayment of a loan over time. The second is used in the context of business accounting and is the act of spreading the cost of an expensive and long-lived item over many periods. The two are explained in more detail in the sections below.

Paying Off a Loan Over Time

When a borrower takes out a mortgage, car loan, or personal loan, they usually make monthly payments to the lender; these are some of the most common uses of amortization. A part of the payment covers the interest due on the loan, and the remainder of the payment goes toward reducing the principal amount owed. Interest is computed on the current amount owed and thus will become progressively smaller as the principal decreases. It is possible to see this in action on the amortization table.

Credit cards, on the other hand, are generally not amortized. They are an example of revolving debt, where the outstanding balance can be carried month-to-month, and the amount repaid each month can be varied. Please use our Credit Card Calculator for more information or to do calculations involving credit cards, or our Credit Cards Payoff Calculator to schedule a financially feasible way to pay off multiple credit cards. Examples of other loans that aren't amortized include interest-only loans and balloon loans. The former includes an interest-only period of payment, and the latter has a large principal payment at loan maturity.

Amortization Schedule

An amortization schedule (sometimes called an amortization table) is a table detailing each periodic payment on an amortizing loan. Each calculation done by the calculator will also come with an annual and monthly amortization schedule above. Each repayment for an amortized loan will contain both an interest payment and payment towards the principal balance, which varies for each pay period. An amortization schedule helps indicate the specific amount that will be paid towards each, along with the interest and principal paid to date, and the remaining principal balance after each pay period.

Basic amortization schedules do not account for extra payments, but this doesn't mean that borrowers can't pay extra towards their loans. Also, amortization schedules generally do not consider fees. Generally, amortization schedules only work for fixed-rate loans and not adjustable-rate mortgages, variable rate loans, or lines of credit.

Spreading Costs

Certain businesses sometimes purchase expensive items that are used for long periods of time that are classified as investments. Items that are commonly amortized for the purpose of spreading costs include machinery, buildings, and equipment. From an accounting perspective, a sudden purchase of an expensive factory during a quarterly period can skew the financials, so its value is amortized over the expected life of the factory instead. Although it can technically be considered amortizing, this is usually referred to as the depreciation expense of an asset amortized over its expected lifetime. For more information about or to do calculations involving depreciation, please visit the Depreciation Calculator.

Amortization as a way of spreading business costs in accounting generally refers to intangible assets like a patent or copyright. Under Section 197 of U.S. law, the value of these assets can be deducted month-to-month or year-to-year. Just like with any other amortization, payment schedules can be forecasted by a calculated amortization schedule. The following are intangible assets that are often amortized:

  1. Goodwill, which is the reputation of a business regarded as a quantifiable asset
  2. Going-concern value, which is the value of a business as an ongoing entity
  3. The workforce in place (current employees, including their experience, education, and training)
  4. Business books and records, operating systems, or any other information base, including lists or other information concerning current or prospective customers
  5. Patents, copyrights, formulas, processes, designs, patterns, know-hows, formats, or similar items
  6. Customer-based intangibles, including customer bases and relationships with customers
  7. Supplier-based intangibles, including the value of future purchases due to existing relationships with vendors
  8. Licenses, permits, or other rights granted by governmental units or agencies (including issuances and renewals)
  9. Covenants not to compete or non-compete agreements entered relating to acquisitions of interests in trades or businesses
  10. Franchises, trademarks, or trade names
  11. Contracts for the use of or term interests in any items on this list

Some intangible assets, with goodwill being the most common example, that have indefinite useful lives or are "self-created" may not be legally amortized for tax purposes.

According to the IRS under Section 197, some assets are not considered intangibles, including interest in businesses, contracts, land, most computer software, intangible assets not acquired in connection with the acquiring of a business or trade, interest in an existing lease or sublease of a tangible property or existing debt, rights to service residential mortgages (unless it was acquired in connection with the acquisition of a trade or business), or certain transaction costs incurred by parties in which any part of a gain or loss is not recognized.

Amortizing Startup Costs

In the U.S., business startup costs, defined as costs incurred to investigate the potential of creating or acquiring an active business and costs to create an active business, can only be amortized under certain conditions. They must be expenses that are deducted as business expenses if incurred by an existing active business and must be incurred before the active business begins. Examples of these costs include consulting fees, financial analysis of potential acquisitions, advertising expenditures, and payments to employees, all of which must be incurred before the business is deemed active. According to IRS guidelines, initial startup costs must be amortized.

Amortization Calculator (2024)

FAQs

What is the easiest way to calculate amortization? ›

To calculate amortization, first multiply your principal balance by your interest rate. Next, divide that by 12 months to know your interest fee for your current month. Finally, subtract that interest fee from your total monthly payment. What remains is how much will go toward principal for that month.

How do you calculate amortization value? ›

You can follow these steps to calculate the amortization for an intangible asset:
  1. Find the basis and residual value. Calculating the amortization of an intangible asset is like calculating its depreciation. ...
  2. Divide by the remaining months. ...
  3. Record the cost on your income statement.
Jul 1, 2024

What happens if I pay an extra $2000 a month on my mortgage? ›

The additional amount will reduce the principal on your mortgage, as well as the total amount of interest you will pay, and the number of payments.

How do you beat an amortization schedule? ›

3 Loan-Amortization Tips
  1. Add Extra Dollars to Your Monthly Payment. If your total mortgage loan is $100,000 and your fixed monthly payment is $500, add $100 or more to each monthly mortgage payment to pay down the loan more quickly. ...
  2. Make a Lump-Sum Payment. ...
  3. Make Bi-weekly Payments.
Mar 8, 2023

What is the most commonly used method of amortization? ›

There are several ways to calculate the amortization of intangibles. The most common way to do so is by using the straight line method, which involves expensing the asset over a period of time.

What is the formula for total 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.

What is the formula for calculating amortization expense? ›

There is a mathematical formula to calculate amortization in accounting to add to the projected expenses. Amortization of an intangible asset = (Cost of asset-salvage value)/Number of years the asset can add value. Salvage value - If the asset has any monetary value after its useful life.

Is there an Excel formula for amortization? ›

Alternatively, we can use Excel's IPMT function, which has the following syntax: =IPMT(rate, per, nper, pv, [fv], [type]). Again, we are focused on the required arguments: Rate: The interest rate of the loan. Per: This is the period for which we want to find the interest and must be in the range from 1 to nper.

What is the formula for calculating loan amount? ›

E = P*r*(1+r)^n/((1+r)^n-1) where, E is EMI. P is the principal loan amount, r is the rate of interest calculated monthly, and.

What happens if I pay 3 extra mortgage payments a year? ›

You might find that making extra payments on your mortgage can help you repay your loan more quickly, and with less interest than making payments according to loan's original payment terms.

How do you pay off a 30-year mortgage in 15 years? ›

It suggests that homeowners who can afford substantial extra payments can pay off a 30-year mortgage in 15 years by making a weekly extra payment, equal to 10% of their monthly mortgage payment, toward the principal.

What happens if I pay an extra $100 a month on my mortgage principal? ›

Save on interest

Since your interest is calculated on your remaining loan balance, making additional principal payments every month will significantly reduce your interest payments over the life of the loan. By paying more principal each month, you incrementally lower the principal balance and interest charged on it.

Why do lenders typically use the amortization calculation formula? ›

In the context of loan repayment, amortization schedules provide clarity into what portion of a loan payment consists of interest versus principal. This can be useful for purposes such as deducting interest payments for tax purposes.

How to pay off a 300k mortgage in 5 years? ›

There are some easy steps to follow to make your mortgage disappear in five years or so.
  1. Setting a Target Date. ...
  2. Making a Higher Down Payment. ...
  3. Choosing a Shorter Home Loan Term. ...
  4. Making Larger or More Frequent Payments. ...
  5. Spending Less on Other Things. ...
  6. Increasing Income.

What is the best amortization period? ›

Shorter Amortization Periods Save You Money

If you choose a shorter amortization period, such as a 15-year mortgage, you will have higher monthly payments, but you will also save considerably on interest over the life of the loan, and you will own your home sooner.

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. All of these give correct answers; the choice of which to use depends on which is most convenient for a particular situation.

How do you calculate simple interest amortization? ›

Formula for calculating simple interest

You can calculate your total interest by using this formula: Principal loan amount x Interest rate x Loan term in years = Interest.

References

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