1. What is the Mortgage Payment Formula?

The mortgage payment formula calculates the fixed monthly payment required to fully amortize a loan over its term. It accounts for the loan amount, interest rate, and loan duration to determine the periodic payment.

2. How Does the Calculator Work?

The calculator uses the standard mortgage payment formula:

Where:

• \( PMT \) — Monthly payment
• \( P \) — Principal loan amount
• \( r \) — Monthly interest rate (annual rate ÷ 12)
• \( n \) — Number of payments (loan term in years × 12)

Explanation: The formula calculates the fixed payment needed to pay off the loan over its term, with each payment covering both principal and interest.

3. Importance of Mortgage Calculation

Details: Understanding your mortgage payments helps with budgeting, comparing loan offers, and planning your financial future. It shows how much interest you'll pay over the life of the loan.

4. Using the Calculator

Tips: Enter the loan amount in dollars, annual interest rate as a percentage (e.g., 3.5 for 3.5%), and loan term in years. The calculator will show your monthly payment, total repayment amount, and total interest paid.

5. Frequently Asked Questions (FAQ)

Q1: What's included in the monthly payment?
A: This calculates principal and interest only. Your actual payment may include property taxes, insurance, and PMI if applicable.

Q2: How does loan term affect payments?
A: Shorter terms mean higher monthly payments but less total interest. Longer terms reduce monthly payments but increase total interest.

Q3: What's the difference between fixed and variable rates?
A: Fixed rates stay the same for the entire term. Variable rates can change, affecting your future payments.

Q4: How can I pay less interest?
A: Make extra principal payments, choose a shorter term, or refinance at a lower rate when possible.

Q5: What's loan amortization?
A: The process of paying off debt with regular payments over time, where early payments are mostly interest and later payments are mostly principal.