Commercial Amortization Schedule Calculator

Where principal overtakes interest

Interest is charged on the balance outstanding, so the split shifts every period. The payment in which principal first exceeds interest is a quick measure of how front-loaded a loan is. On the loan above, run to the end of its 30-year amortization, that is payment 238, in year 20 — after the 10-year term has already matured. At lower rates it arrives earlier; at higher rates it can fall past the midpoint of the schedule.

Day-count conventions, and why two lenders disagree

Payments are quoted on a level 30/360 basis: every month thirty days, every year three hundred and sixty. Interest, however, may accrue on a different basis, and the mismatch is where two correct calculations diverge.

• 30/360 — twelve equal periods. What payment quotes assume, and what most residential lending uses throughout.
• Actual/360, or 365/360 — a full year's rate spread over 360 days but charged for the actual days elapsed, so a 365-day year accrues roughly 1.4% more interest than 30/360 at the same nominal rate. Standard on commercial bank debt, and a genuine cost difference rather than a quirk.
• Actual/365 — actual days over a 365-day year. Common outside the United States.

This tool solves the payment on 30/360 and accrues on whichever convention you select, then reports the residual rather than folding it into the final payment. That residual is the honest measure of what the convention costs you over the term. On the default loan, Actual/360 adds $1,924 of interest in the first year alone; if a lender's schedule disagrees with yours by about that proportion, the convention is almost always the reason.

What extra payments actually do

A payment above the scheduled amount applies entirely to principal, and because interest is charged on the balance outstanding, every dollar of principal retired early avoids interest on that dollar for the entire remaining term. That is why prepayment is so much more powerful early, and why the standard advice to "pay a little extra each month" understates how much the timing matters.

The schedule is the right place to see this. A single extra payment in year one removes a row from the end of the table — the final payment, which is almost entirely principal — and every month of interest that would have accrued on that balance in between. The same payment in year twenty removes far less, because there is far less remaining term for the avoided interest to accumulate over.

Where prepayment is not free

Commercial debt frequently restricts early paydown. Most commercial mortgages come with built-in prepayment penalties and prohibit early principal reductions altogether. While some lenders permit a once-a-year penalty-free paydown capped at 10% of the remaining loan balance, this allowance is uncommon. Other loans enforce yield maintenance to make the lender whole for expected interest, or defeasance on securitized debt requiring a replacement basket of securities. On loans with these restrictions, prepaying can cost significantly more than the interest saved — check your loan covenants before relying solely on schedule calculations.

Recasting against refinancing

Some lenders will re-amortize a loan after a large principal payment, lowering the payment across the remaining term rather than shortening it. That preserves cash flow instead of accelerating payoff. It is a different objective from prepaying, and worth asking about explicitly, because the default treatment of a lump sum is usually to shorten the term rather than to reduce the payment.