Amortization Formula Explained
The Amortization formula explained in plain English: the equation behind the Amortization Calculator, its variables, and the assumptions it makes.
By Onias Derilus, Mortgage Capital · NMLS# 1859012 · Last Updated: June 2026
It builds a payment-by-payment schedule showing how each mortgage payment splits between interest and principal. You also see how your balance falls to zero over the life of the loan.
The Amortization Formula, Explained
Interest_month = balance × (rate / 12); Principal_month = payment − Interest_month
Early in the loan the balance is large, so most of each payment is interest and little goes to principal. As the balance shrinks, the interest portion falls and the principal portion grows — which is why progress feels slow at first and accelerates later.
The fixed payment itself comes from the standard amortizing-loan formula. The schedule simply applies that payment repeatedly, recalculating the interest split against the declining balance each month.
The formula is only the starting point. Open the amortization calculator to plug in your own numbers and see the result instantly. For a rate tied to your actual file, talk to a licensed broker before you decide.
Turn Your Amortization Estimate Into a Real Pre-Approval
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Rates are illustrative only. APR and payments vary by credit score, loan amount, and market conditions. Subject to credit approval. Not a commitment to lend. NMLS# 1859012. Equal Housing Lender.