When you take out a fixed-rate mortgage, each monthly payment is split into two parts: interest charged on the outstanding balance and principal that reduces the loan. Early in the term, interest dominates each payment. As the balance shrinks, a larger share goes toward principal — this shift is called amortization.
The monthly payment is derived from the standard annuity formula:
M = P × [r(1 + r)n] / [(1 + r)n − 1]
Our calculator applies this formula and generates the complete schedule showing every payment's breakdown, making it easy to see exactly how much interest you'll pay over the life of the loan.