1. What is the House Payment Formula?

The house payment formula (PMT) calculates the fixed monthly payment required to repay a mortgage loan over its term. It accounts for the loan amount, interest rate, and loan duration to determine an amortized payment schedule.

2. How Does the Calculator Work?

The calculator uses the standard payment formula:

Where:

• \( PMT \) — Monthly payment amount
• \( P \) — 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 fully amortize the loan over its term, with each payment covering both principal and interest.

3. Importance of Payment Calculation

Details: Accurate payment calculation helps borrowers understand their financial commitments, compare loan options, and budget effectively for home ownership.

4. Using the Calculator

Tips: Enter the total loan amount (after down payment), the annual interest rate (APR), and the loan term in years. The calculator will show your estimated monthly payment, total repayment amount, and total interest paid.

5. Frequently Asked Questions (FAQ)

Q1: Does this include property taxes and insurance?
A: No, this calculates only the principal and interest payment (P&I). Your actual payment may include escrow for taxes and insurance (PITI).

Q2: How does a larger down payment affect payments?
A: A larger down payment reduces the principal (P), resulting in lower monthly payments and less total interest.

Q3: What's the difference between APR and interest rate?
A: APR includes both interest rate and loan fees, giving a more complete picture of borrowing costs.

Q4: How do extra payments affect the loan?
A: Extra payments reduce principal faster, saving interest and potentially shortening the loan term.

Q5: What's better - shorter term or lower rate?
A: Shorter terms typically have lower rates but higher payments. Compare total interest costs to decide.