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The standard amortization formula is: M = P × [r(1+r)ⁿ] / [(1+r)ⁿ−1], where P is the principal (loan amount), r is the monthly interest rate (annual rate ÷ 12 ÷ 100), and n is the total number of months. Each month, part of the payment covers interest on the remaining balance, and the rest reduces the principal.

A $300,000 mortgage at 7% annual interest over 30 years (360 months) has a monthly payment of approximately $1,995.91. The total paid over 30 years would be about $718,527, meaning about $418,527 in interest.

A larger down payment reduces the loan principal, which directly reduces the monthly payment and total interest paid. For example, a 20% down payment on a $300,000 home means you only finance $240,000, reducing the monthly payment and saving tens of thousands in interest compared to a 5% down payment.

An amortization schedule shows how each loan payment is split between principal (reducing the loan balance) and interest (cost of borrowing). In early payments, most of the money goes to interest. As the loan matures, the proportion going to principal increases. The schedule lets you see exactly when the loan will be paid off and how much interest you will have paid at any point.

A 15-year mortgage has higher monthly payments but you pay significantly less total interest and build equity faster. A 30-year mortgage has lower monthly payments, giving more cash flow flexibility, but you pay roughly twice as much interest over the life of the loan. Use this calculator to compare both scenarios for your specific loan amount and rate.