Monthly payment
$1,580
Total interest: $318,861
Total cost$568,861
Payments360
Crossover (P>I)Year 19
Payoff—
Month by month, dollar by dollar — where your loan payment actually goes.
An amortization schedule answers one question per row: how much of this payment is interest, how much is principal, what's the balance after. The math is simple recursion — interest = balance × monthly rate; principal = payment − interest; new balance = old balance − principal — repeated until the balance hits zero exactly at term-end.
M — fixed monthly paymentP — original principalr — monthly rate (APR ÷ 12)n — total number of paymentsThe "crossover month" — when principal first exceeds interest in a single payment — is the schedule's most-cited landmark. It's also strongly rate-dependent: at 4% it's year 14; at 6.5% year 19; at 8% year 22.
The same $250,000 / 30-year mortgage at different rates. Higher rates push the crossover later because each early payment is consumed by larger interest charges.
| Rate | Monthly | Crossover month | Total interest |
|---|---|---|---|
| 3.0% | $1,054 | ~Year 13 | $129,444 |
| 4.5% | $1,267 | ~Year 16 | $206,016 |
| 6.5% | $1,580 | ~Year 19 | $318,861 |
| 7.5% | $1,748 | ~Year 21 | $379,283 |
| 8.5% | $1,922 | ~Year 22 | $441,857 |
52 weeks ÷ 2 = 26 biweekly periods. Each is half a monthly payment, so total annual = 13 monthlys instead of 12. On a 30-year mortgage at 6.5%, biweekly schedules typically retire the loan 4-5 years early and save ~$60,000 in interest. DIY by adding 1/12 of your monthly payment each month — never pay a bank a fee for a "biweekly program."
Most US loans use simple-interest amortization where prepayment saves interest dollar-for-dollar. The Rule of 78s (precomputed interest) front-loads interest and largely eliminates the prepayment benefit. Federal law banned it on consumer loans >61 months in 1992 (15 USC 1615), but it still appears on some subprime auto and short-term personal loans. Always check the disclosure for "precomputed" or "Rule of 78" language.
When the payment is less than the interest accrued, the shortfall gets added to principal — and the balance grows. Option ARMs (largely banned for primary residences by Dodd-Frank) and some student-loan income-driven repayment plans can produce neg-am during low-income years. The borrower sees an "affordable" payment but owes more each month.
Sources: Reg Z (12 CFR 1026) APR / amortization disclosure; 15 USC 1615 prohibition on Rule of 78s >61 months; IRS Pub 936 mortgage interest deduction (TCJA $750k cap); CFPB Ability-to-Repay rule (12 CFR 1026.43); Dodd-Frank Title XIV restrictions on negative amortization.
Amortization is paying off a loan in equal periodic payments, each split between interest (rate × current balance) and principal (the rest). The schedule front-loads interest because early balances are large; over time the principal share grows until the loan ends at zero. The standard US mortgage, auto loan, and personal loan all use simple-interest monthly amortization.
The crossover depends on rate and term. On a 30-year fixed at 6.5%, around year 19; at 4%, around year 14; at 8%, around year 22. Higher rates push it later because more of each early payment is consumed by interest. The calculator shows your exact crossover month.
Interest is computed on the remaining balance. Month one, the balance is the full principal — interest is at its maximum. As principal slowly retires, the interest charge each month gets smaller and the principal share grows. On a $250,000 / 30-year / 6.5% mortgage: month 1 is ~86% interest; month 240 is roughly 50/50; month 360 is 99% principal.
On a $250,000 / 30-year / 6.5% mortgage, an extra $100/month pays the loan off about 4 years 8 months early and saves ~$59,000 in interest. Every additional principal dollar eliminates all the interest that dollar would have accrued from now until term-end. Earlier dollars matter more — $100 in year 1 saves more than $100 in year 25.
Biweekly works because 52 weeks ÷ 2 = 26 biweekly periods = 13 monthly payments per year. On a 30-year mortgage, this typically cuts 4-5 years and saves significant interest. Same effect by adding 1/12 of your monthly to each payment. Avoid biweekly programs that charge fees — DIY produces identical math for free.
In US accounting and tax: depreciation applies to tangible assets (buildings, equipment); amortization applies to intangibles (patents, goodwill, debt). Both spread cost over time. In personal finance, amortization usually means loan amortization. IRS §197 governs intangible-asset amortization for businesses.
Almost never anymore. Federal law banned it on consumer loans >61 months in 1992 (15 USC 1615). The Rule of 78s (sum-of-digits) is precomputed interest that front-loads more aggressively than standard amortization, penalizing early payoff. It still appears occasionally on subprime auto and short-term consumer loans — always check the disclosure.
For 2026, deductible on up to $750,000 of acquisition indebtedness for primary plus one second home (post-TCJA cap, loans originated after Dec 15, 2017). Must itemize on Schedule A — and the standard deduction ($15,750 single / $31,500 MFJ in 2026) is high enough that many filers don't. In the 24% bracket, $10,000 of interest reduces taxes by $2,400. Per IRS Pub 936.
When the monthly payment is less than the interest accrued, the unpaid interest gets added to principal. The balance grows instead of shrinks. Common in option ARMs (largely banned by Dodd-Frank for primary residences) and some student-loan income-driven repayment plans during low-income years. Dangerous because the borrower sees an affordable payment while debt silently increases.
Most US mortgages use monthly amortization — interest accrues at the start of each month based on prior balance. Most US auto loans use daily simple interest (DSI) — interest accrues every day, so paying early in the cycle reduces interest, paying late increases it. On DSI, sending payment 5 days before the due date saves ~$2-5/month on a typical auto loan. On monthly-amortized loans, day-of-month doesn't affect interest.