Reverse Amortization Table Example and How to Read It

A reverse amortization table shows how a loan balance changes when payments do not cover the interest charged, so the unpaid interest is added to the debt. For example, a $100,000 balance at 5% annual interest with no payments grows to about $105,000 after one year, assuming monthly compounding; this calculator estimates the balance after a chosen period.

Formula

The calculator applies the standard balance formula for a fixed-rate loan with level monthly payments:

B_n = P(1 + r)ⁿ − M × ((1 + r)ⁿ − 1) / r

• B_n is the estimated balance after the period, in dollars.
• P is the starting balance, in dollars.
• r is the monthly interest rate as a decimal: APR ÷ 1,200.
• n is the number of monthly periods: years × 12.
• M is the payment made at the end of each month, in dollars.

“Increase in balance” is the estimated ending balance minus the starting balance. “Total payments made” is the monthly payment multiplied by the number of months. The formula assumes the APR stays fixed and interest is compounded monthly. It can represent negative amortization when the payment is too small to cover accrued interest. With a zero payment, it reduces to compound growth: P(1 + r)ⁿ.

Worked Example

Using the calculator’s default inputs—$100,000 starting balance, 5% APR, one year, and a $0 monthly payment—the monthly rate is 0.05 ÷ 12 = 0.0041667, and the period is 1 × 12 = 12 months.

1. Ending balance: $100,000 × (1 + 0.0041667)¹² − $0 × ((1 + 0.0041667)¹² − 1) ÷ 0.0041667 = approximately $105,116.19.
2. Increase: $105,116.19 − $100,000 = $5,116.19.
3. Total payments: $0 × 12 = $0.00.

The increase is slightly more than $5,000 because monthly interest is charged on a balance that includes prior months’ accrued interest. A simple calculation of 5% × $100,000 gives $5,000, but that is simple interest, not monthly compounding.

Assumptions

• The interest rate is fixed for the entire period.
• Payments, if any, are made at the end of each month.
• Interest compounds monthly at APR ÷ 12.
• The estimate excludes fees, taxes, insurance, PMI, escrow, rate changes, payment timing variations, and any charges or credits not entered as a payment.

What a Reverse Amortization Table Shows

A conventional amortization schedule tracks a loan being paid down: each payment is divided between interest and principal, and the balance generally falls. A reverse amortization table instead highlights periods when the balance rises because the payment is below the interest accrued. The term describes the direction of the balance change; it does not mean the loan is literally being paid backward.

For each month, a detailed table can show the opening balance, interest added, payment, and closing balance. Under the calculator’s assumptions, monthly interest equals the opening balance multiplied by the monthly rate. The payment is then subtracted. If the payment is less than that month’s interest, the remaining interest increases the balance. If it equals the interest, the balance stays about level; if it exceeds interest, the balance declines.

The calculator gives an ending estimate rather than listing every month. It assumes the same payment amount throughout. Actual statements may use specific day-count conventions, payment dates, rate adjustments, fees, or contractual rules, so their figures may differ.

How to Read the Example and Use the Calculator

Enter the loan’s current principal balance, not necessarily its original amount, alongside the annual APR, the period in years, and the monthly payment. The ending balance is the main result; the increase shows how much the balance changed, and total payments records the cash payments assumed by the formula. Enter zero when no monthly payment is made.

To build a month-by-month table outside this calculator, repeat the calculation for each month: multiply the opening balance by APR ÷ 1,200 to estimate interest, subtract the payment from the opening balance plus that interest, and use the result as the next month’s opening balance. Keep extra decimal places while calculating, then round displayed money values to cents. Rounding interest to cents every month can create small differences over time.

Use a consistent APR and time unit. The APR field is a percent per year, not a decimal monthly rate: 5% is entered as 5, and the formula converts it to a monthly decimal. The payment field is a monthly amount, not an annual total. If payments change, are skipped, or happen at a different interval, one constant-payment estimate cannot reproduce the full schedule; calculate each period with the applicable payment and rate instead.

Why a Balance Can Grow—and What This Estimate Leaves Out

Negative amortization occurs when scheduled payments do not cover all interest charged and the unpaid amount is added to the loan balance. A payment can be below the interest for a month even when it is not zero. For instance, at 5% APR on a $100,000 balance, the first month’s interest under this model is about $416.67; a $300 payment would leave about $116.67 of that month’s interest unpaid and added to the balance.

This is an illustration of the arithmetic, not a statement about any particular loan contract. How a real loan handles unpaid interest, whether the balance may grow, and whether payment amounts or rates can change depend on the agreement. The calculator does not model payment caps, deferred-interest provisions, rate resets, fees added to principal, or limits on balance growth. Check the account’s statements and loan documents for the balance calculation that applies to it.

The formula also treats APR ÷ 12 as the periodic rate. Some products calculate interest using daily balances or other methods, so a monthly estimate based on APR may not match a statement exactly. To estimate a past or future balance more closely, use the lender’s posted balance, the applicable rate for each period, actual payment dates and amounts, and any additional principal charges or credits.

Frequently Asked Questions

What is a reverse amortization table?
A table that tracks a loan balance growing when payments are insufficient to cover interest, or otherwise illustrates a balance moving upward rather than being paid down.

How do you calculate negative amortization?
For each period, add accrued interest to the opening balance and subtract the payment. If interest exceeds the payment, the difference increases the balance, subject to the loan’s actual contract terms.

Does a larger balance always mean negative amortization?
Not necessarily. Fees, new borrowing, adjustments, or other account entries can also raise a balance. Negative amortization specifically refers to unpaid interest being added to principal or the balance.

Is this the same as a reverse mortgage?
No. A reverse amortization table is a way to show balance changes. A reverse mortgage is a specific type of loan; this calculator does not model its terms or rules.

Why does my lender’s balance differ from this estimate?
The lender may use daily interest, different payment dates, changing rates, fees, rounding rules, or contract-specific calculations that the simplified monthly formula does not include.

This result is an estimate; the lender’s disclosure gives the exact figures.

Related

• Free Loan Amortization Table Excel: Formula and Example
• Free Loan Calculator With Amortization Table
• Free Amortization Table by Month Calculator

in bal | Starting loan balance | $ | 100000 | 0.01 | 100000000
in apr | Interest rate (APR) | % | 5 | 0.01 | 100
in yrs | Time elapsed | years | 1 | 0.0833 | 50
in pmt | Monthly payment | $ | 0 | 0 | 100000000
out end | Estimated balance after period | $ | bal * (1 + apr / 1200) ^ (yrs * 12) - pmt * ((1 + apr / 1200) ^ (yrs * 12) - 1) / (apr / 1200) | 2
out growth | Increase in balance | $ | end - bal | 2
out unpaid | Total payments made | $ | pmt * yrs * 12 | 2