1. What is Loan Amortization?

Loan amortization is the process of paying off a debt over time through regular payments. A portion of each payment goes toward the principal and a portion goes toward interest. The 30-year amortization schedule spreads payments over 360 months (30 years).

2. How Does the Calculator Work?

The calculator uses the amortization formula:

Where:

• \( P \) — Principal loan amount ($)
• \( r \) — Monthly interest rate (annual rate ÷ 12)
• \( 360 \) — Number of monthly payments (30 years)
• \( PMT \) — Monthly payment amount

Explanation: The formula calculates the fixed monthly payment required to pay off the loan over 30 years, accounting for compound interest.

3. Importance of Amortization Calculation

Details: Understanding your amortization helps with budgeting, shows how much interest you'll pay over the loan term, and illustrates how payments are allocated between principal and interest.

4. Using the Calculator

Tips: Enter the loan amount in dollars and annual interest rate as a percentage (e.g., 3.5 for 3.5%). All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Why choose a 30-year loan?
A: 30-year loans have lower monthly payments than shorter terms, making them more affordable for many borrowers, though they result in more total interest paid.

Q2: How much of my payment goes to principal vs interest?
A: Early in the loan, most of your payment goes toward interest. Over time, more goes toward principal. This calculator shows the total interest paid.

Q3: What happens if I make extra payments?
A: Extra payments reduce the principal faster, saving interest and potentially shortening the loan term.

Q4: Are there other loan terms available?
A: Yes, common terms include 15-year and 20-year mortgages, which have higher monthly payments but lower total interest costs.

Q5: Does this include taxes and insurance?
A: No, this calculates only principal and interest. Actual mortgage payments often include escrow for property taxes and insurance.