1. What is the House Payment Formula?

The house payment formula calculates the fixed monthly payment (PMT) required to repay a loan over a specified term. This standard mortgage formula accounts for the loan amount, interest rate, and loan duration.

2. How Does the Calculator Work?

The calculator uses the standard amortization formula:

Where:

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

Explanation: The formula calculates the fixed payment needed to pay off the loan with interest over the specified term, with most of the early payments going toward interest.

3. Understanding Mortgage Payments

Details: Mortgage payments typically include principal and interest. Property taxes, insurance, and PMI may be added in actual payments. This calculator focuses on the principal and interest components.

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 monthly payment, total payment over the loan term, and total interest paid.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between APR and interest rate?
A: The interest rate is the cost of borrowing, while APR includes fees and other loan costs. This calculator uses the interest rate.

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 an amortization schedule?
A: A table showing how each payment is split between principal and interest over the life of the loan.

Q4: How much should my house payment be?
A: Financial advisors often recommend keeping housing costs below 28% of gross monthly income.

Q5: What about adjustable-rate mortgages (ARMs)?
A: This calculator is for fixed-rate mortgages. ARM payments change when the interest rate adjusts.