A $500,000 mortgage at 4.85% over 25 years has a monthly payment of $2,865.48 and costs $359,643 in interest. Amortization is the total time needed to pay the whole loan off. Enter your own loan below to see the payment, the total interest and a table for every year.
Why is so little of the early payment principal?
Every payment splits into interest and principal. Interest is charged on what you still owe, so the early payments are mostly interest. Once the balance drops, less of each payment goes to interest and more to principal, until the schedule ends at zero.
Look at the very first payment on this loan. Of the $2,865.48, about $2,000.71 is interest and only $864.77 chips away at the debt. Principal doesn’t overtake interest until the 128th payment, which is almost eleven years in.
That has a practical side. Any principal you pay off early stops charging interest for all the years left, so a few bucks of extra payment in year one does more work than the same few bucks in year twenty. Check your lender’s prepayment rules first, since lenders set their own limits on extra payments.
The last payment differs slightly from the rest. The regular payment is rounded to the cent, so the final one clears the small remainder.
The compounding method matters too. The Interest Act requires mortgage interest to be calculated yearly or half-yearly, not in advance, and lenders compound fixed-rate mortgages twice a year, which is the method this tool follows. Divide the annual rate by twelve instead and you’d understate the cost, which on a large loan adds up to real money every month.
What does the loan look like year by year?
| Year | Principal paid | Interest paid | Balance at year end |
|---|---|---|---|
| 1 | $10,609 | $23,777 | $489,391 |
| 5 | $12,850 | $21,536 | $441,487 |
| 10 | $16,329 | $18,056 | $367,132 |
| 15 | $20,750 | $13,635 | $272,645 |
| 20 | $26,369 | $8,017 | $152,576 |
| 25 | $33,507 | $878 | $0 |
How does the amortization length change the cost?
In the first year you pay $34,386 in total, and only $10,609 of it reduces the loan. Fifteen years in, which is 60% of the term, you still owe $272,645, more than half of what you borrowed. Over the whole term, 41.8% of everything you pay is interest.
Now compare terms on the same loan. A 20-year amortization costs $3,245.26 a month and $278,860 of interest, which is $379.78 more each month and $80,783 less interest than on the 25-year plan. Stretch it to 30 years and you pay $2,623.84 a month, $241.64 less, but interest climbs to $444,585, or $84,942 more.
What about bi-weekly? Over 25 years that’s a $1,321.11 payment every other week, with $358,717 in interest. You save only $926, because these payments aren’t the accelerated kind.
So which one should you pick? It comes down to cash flow. If the extra $380 a month for the 20-year plan fits without squeezing groceries and the kids’ hockey, the interest saving is big. If it doesn’t, a longer schedule keeps the payment manageable, and you can still add extra payments later when money’s looser.
Is amortization the same as the mortgage term?
No, and plenty of people mix them up. The Financial Consumer Agency of Canada’s page on choosing a mortgage defines the term as the length of your contract and the amortization as the time it takes to pay off the mortgage. The term is shorter, and you renew at the end of each one.
Cheaper each month doesn’t mean cheaper overall. A longer amortization cuts your monthly bill but adds tens of thousands in interest. The calculator also assumes one rate for the whole amortization, while a real mortgage is renewed every few years at whatever rate applies then, and it leaves out property tax and insurance premiums as well as extra payments, which the prepayment page covers. On an insured mortgage, a 30-year amortization is limited to first-time buyers and buyers of new builds, as the Department of Finance’s mortgage reform announcement sets out.
To include the insurance premium and price a purchase, use the mortgage payment calculator. Planning to pay faster? The mortgage prepayment calculator measures what extra payments save. Thinking of a new loan? Try the refinance estimator. And the fixed vs variable mortgage calculator compares the two rate types.
What this page is based on
The compounding method follows Canada’s Interest Act, and the maths is a standard loan schedule with the final payment adjusted to clear the balance. Your lender’s statement may differ by a few dollars. This website has no connection with any lender or government body.
About this calculator
- What it does
- See your mortgage payment, total interest and a year-by-year amortization table.
- Category
- Mortgage
- Last checked
- September 30, 2026
- Result type
- Estimate for information only, not tax advice.
Frequently asked questions
What is the monthly payment on a $500,000 mortgage?
At 4.85% over 25 years, a $500,000 mortgage has a monthly payment of $2,865.48 and costs $359,643 in interest over the full amortization. Your own rate, loan size and amortization change both figures, so enter them in the calculator.
Why is so little principal paid at first?
Interest is charged on the balance you still owe, and early in the mortgage that balance is at its highest. In year one of the example, $23,777 of the $34,386 you pay is interest, and principal does not overtake interest until the 128th payment.
How much interest does a 20-year amortization save?
On the same $500,000 loan, 20 years saves $80,783 in interest compared with 25 years, but the payment is $379.78 higher each month. Stretching to 30 years lowers the payment by $241.64 and adds $84,942 in interest.
Why is the final mortgage payment different?
The regular payment is rounded to the cent, which leaves a small remainder at the end. The last payment of the schedule is adjusted slightly to clear it and bring the balance to zero. Your lender's statement may differ by a few dollars.
Does bi-weekly payment change much?
Not by itself. Paying $1,321.11 every two weeks for 25 years leaves $358,717 in interest on the example, only $926 less than monthly payments, because these payments are not the accelerated kind.
What is the difference between amortization and term?
Amortization is the total time to pay off the whole mortgage, such as 25 years. The term is the length of the contract with your lender and your rate, after which you renew. The term is shorter than the amortization.
Sources and updates
Updated: . How we check rates · Editorial team · Updates