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.

What is the Promissory Note Amortization Calculator?

Produces a month-by-month amortization table showing principal, interest, balance, and total paid for fixed-rate, interest-only, or balloon promissory notes. Real estate attorneys, lenders, and borrowers use it to verify note terms and track balance. It runs free in your browser on Gera Tools, with nothing uploaded.

Promissory Note Amortization Calculator

Name: Promissory Note Amortization Calculator
Creator: Gera Tools
License: https://creativecommons.org/licenses/by/4.0/

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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.

When to use an amortization schedule

Amortization schedules are used by borrowers to understand the true cost of a note, by lenders to confirm that payments match the agreed terms, and by real estate attorneys and title companies to verify the payoff balance at a closing. Seller-financed notes in real estate — where the seller acts as the bank and receives monthly payments from the buyer — are one of the most common contexts where a clear schedule is needed independently of a bank’s system.

A schedule is also useful for:

Early payoff planning: seeing how much principal remains at any month tells a borrower exactly what a payoff cheque would be.
Comparing note structures: running the same principal and rate under fully amortizing versus balloon terms shows the trade-off between monthly payment size and balloon exposure.
Accounting and tax: tracking how much of each payment is interest (typically deductible) versus principal (a balance sheet item) requires a row-by-row breakdown.

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.

Worked examples

Fully amortizing note. For example, a 200,000 note at 7% over 30 years (360 months) carries a monthly payment of approximately 1,331. After 60 payments (5 years), the balance is still roughly 188,000, because early payments are mostly interest — the front-loading effect of standard amortization.

Balloon note. A 30-year-amortized balloon due in 5 years keeps that same 1,331 monthly payment but requires the approximately 188,000 remaining balance as a lump sum at month 60. This structure keeps monthly payments low for the borrower but creates refinancing risk at the balloon date.

Interest-only note. At 7% on 200,000, the monthly interest payment is 200,000 × (0.07 / 12) = approximately 1,167. No principal is paid during the interest-only period, so the full 200,000 principal is due at maturity. Monthly payments are lower than a fully amortizing note of the same principal and rate, but the borrower builds no equity.

Notes on convention

This calculator uses standard monthly compounding, which is the most common convention for promissory notes and matches how most lenders quote amortization schedules. Some commercial notes accrue daily (actual/365 or actual/360), which produces slightly different balance figures, particularly on notes with irregular payment dates. Always confirm the accrual basis stated in the note itself.