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

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)


How can I 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.

What is a 5 year loan with 30 year amortization? ›

Balloon payment schedule

A 30/5 structure means the lender calculates your monthly payments as if you'll be repaying the loan for 30 years, but you actually only make those payments for five years. At the end of the five-year (60-month) term, you'll repay the remaining principal, or $260,534.53, as a lump sum.

How do you calculate monthly amortization in the Philippines? ›

The monthly amortization can be calculated using the following formula: Monthly Amortization = (Loan Amount) x (Monthly Interest Rate) / (1 - (1 + Monthly Interest Rate)^(-Total Number of Months)).

What is better 25 or 30 year amortization? ›

With a 30-year mortgage, you'll get lower monthly payments and more flexibility than you might with a mortgage that amortizes over 25 years. But you might also pay more for your home overall.

What is an example of amortization? ›

Example A: A business has a $10,000 software license, which it expects will come to an end in five years. Using the straight-line method, the amortization expense would be $2,000 per year for the next five years. At the end of five years, the carrying amount of the asset will be zero.

What is an example of Amortisation? ›

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. The company may amortize the cost of the patent for the decade, recognizing 10% of the expenses each year.

Is 30-year amortization worth it? ›

While they offer financial relief when it comes to monthly payments, 30-year mortgages will keep you in debt longer and cost you more in interest over the long run. For that reason, it's vital to make a plan for dealing with other debts you may owe, primarily those that charge high interest rates, such as credit cards.

How much is a $100 K mortgage payment for 30 years? ›

Monthly payments for a $100,000 mortgage
Annual Percentage Rate (APR)Monthly payment (15-year)Monthly payment (30-year)
5 more rows

How to pay off $150,000 mortgage in 10 years? ›

Expert Tips to Pay Down Your Mortgage in 10 Years or Less
  1. Purchase a home you can afford. ...
  2. Understand and utilize mortgage points. ...
  3. Crunch the numbers. ...
  4. Pay down your other debts. ...
  5. Pay extra. ...
  6. Make biweekly payments. ...
  7. Be frugal. ...
  8. Hit the principal early.
Apr 19, 2022

What is the formula for calculating monthly loans? ›

Monthly Payment = (P × r) ∕ n

Again, “P” represents your principal amount, and “r” is your APR. However, “n” in this equation is the number of payments you'll make over a year. Now for an example. Let's say you get an interest-only personal loan for $10,000 with an APR of 3.5% and a 60-month repayment term.

Is amortization paid monthly? ›

Amortization is the process of paying for a loan by making a series of fixed payments each month (or other agreed upon periods) until your balance reaches zero.

What is the formula for monthly payment? ›

The formula is: M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1], where M is the monthly payment, P is the loan amount, i is the interest rate (divided by 12) and n is the number of monthly payments. To calculate monthly mortgage payments, you must know the loan amount, loan term, loan type and your credit score.

Can you negotiate amortization? ›

Can you change your amortization schedule? The good news is that even if you opt for a longer repayment schedule — such as a 30-year fixed-rate mortgage — you can shorten your amortization and pay off your debt more quickly by either: Refinancing to a shorter-term loan. Making accelerated mortgage payments.

Why do people choose a longer amortization period? ›

Longer Amortization Periods Reduce Monthly Payments

This is a good strategy if you want payments that are more manageable. The following table shows an abridged example of an amortization schedule for a $200,000 30-year, fixed-rate loan at a 4.5% interest rate.

Do banks offer 30-year amortization? ›

30-year mortgages refer to the amortization or length of time it takes to pay off the mortgage balance in full. 30-year amortizations are typically available only to those with downpayments of at least 20%.

How to calculate amortised cost of a loan? ›

Amortised cost model
  1. (1)the amount at which the instrument was initially recognised;
  2. (2)MINUS any repayments of principal;
  3. (3)PLUS or MINUS cumulative amortisation, using the effective interest method, of the difference between the initial recognition amount and the maturity amount, and any fees or transaction costs;

Why do we calculate amortization? ›

Knowing the real value and useful life of our assets, and the amount we owe on, and the term of, our loans, are key to managing our finances better. Amortization is a way of finding out that information whenever we want.

How to calculate depreciation and amortization? ›

Straight line basis is a method of calculating depreciation and amortization, the process of expensing an asset over a longer period of time. It is calculated by dividing the difference between an asset's cost and its expected salvage value by the number of years it is expected to be used.

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.

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