How is the monthly payment calculated?

For a fully amortizing note the payment uses the standard formula P × r / (1 − (1 + r)^−n), where r is the monthly rate and n the number of payments. This produces a level payment that pays the note to zero over the term. Interest-only notes pay only the monthly interest until the principal is due.

What is a balloon payment?

A balloon note is amortized over a long schedule but the full remaining balance is due as a lump sum after a shorter period. The monthly payment is based on the long amortization, keeping payments low, while the balloon repays the large remaining balance at the balloon date.

Why does early in the schedule pay mostly interest?

Interest each month is charged on the outstanding balance, which is highest at the start. Since the payment is level, more of it goes to interest early on and progressively more to principal as the balance falls. This front-loading of interest is normal for amortizing debt.

How is interest-only different?

An interest-only note pays just the accrued interest each month, so the balance never falls during the interest-only period and the full principal remains due at maturity. Payments are lower but no equity is built until the principal is repaid.

Is daily versus monthly interest handled?

This tool uses standard monthly compounding, which is the most common convention for promissory notes and is how most amortization schedules are quoted. Notes that accrue daily or use a 365/360 convention will differ slightly; confirm the accrual basis in the note itself.

Promissory Note Amortization Calculator

A promissory note’s payment and payoff depend on its structure. This calculator builds a complete amortization schedule for fully amortizing, interest-only, or balloon notes, showing how each payment splits between principal and interest and how the balance falls over time.

How it works

For a fully amortizing note the level monthly payment is:

r = annual rate / 12
payment = principal × r / (1 − (1 + r)^(−n))

Each month, interest = balance × r, principal = payment − interest, and the balance falls by that principal. An interest-only note pays only balance × r and the principal is due at maturity. A balloon note uses a long amortization for the payment but the remaining balance is due in full at the balloon month.

Example and notes

A 200,000 note at 7% over 30 years (360 months) carries a payment of about 1,331. After 5 years (60 payments) the balance is still roughly 188,000 because early payments are mostly interest. A 30-year-amortized balloon due in 5 years keeps that same low payment but requires the ~188,000 balance as a lump sum at month 60. Confirm the accrual basis in the note; this tool uses standard monthly compounding.