Home
Back
Mortgage Payment Formula:
| From: | To: |
The mortgage payment formula calculates the fixed monthly payment required to fully amortize a loan over its term. This standard formula is used by lenders to determine your monthly mortgage payments.
The calculator uses the standard mortgage payment formula:
Where:
Explanation: The formula accounts for both principal repayment and interest charges, with the payment amount remaining constant throughout the loan term while the proportion going to principal vs. interest changes over time.
Details: Your monthly mortgage payment typically includes four components: principal, interest, taxes, and insurance (PITI). This calculator focuses on the principal and interest components.
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 estimated monthly payment, total repayment amount, and total interest paid.
Q1: What's included in a typical mortgage payment?
A: While this calculator shows principal and interest, actual payments may also include property taxes, homeowners insurance, and possibly mortgage insurance.
Q2: How does loan term affect my payment?
A: Shorter terms mean higher monthly payments but less total interest paid. Longer terms reduce monthly payments but increase total interest costs.
Q3: What's the difference between fixed and adjustable rates?
A: Fixed-rate mortgages keep the same interest rate for the entire term, while adjustable-rate mortgages (ARMs) may change after an initial fixed period.
Q4: How can I reduce my total interest paid?
A: Making extra principal payments, choosing a shorter loan term, or securing a lower interest rate can all reduce total interest costs.
Q5: What are points in a mortgage?
A: Points are upfront fees paid to lower your interest rate. One point typically costs 1% of the loan amount and may reduce your rate by about 0.25%.