Calculator Home Loan Mortgage Rate Comparison

Mortgage Payment Formula:

\[ PMT = P \times \frac{r \times (1 + r)^n}{(1 + r)^n - 1} \]

Monthly Payment (PMT):

Total Payment:

Total Interest:

Unit Converter ▲

Unit Converter ▼

From:	To:

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. This standard formula is used by lenders to determine your monthly mortgage payments.

2. How Does the Calculator Work?

The calculator uses the mortgage payment formula:

\[ PMT = P \times \frac{r \times (1 + r)^n}{(1 + r)^n - 1} \]

Where:

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

Explanation: The formula accounts for both principal and interest payments, with more interest paid early in the loan term and more principal paid later.

3. Importance of Mortgage Calculation

Details: Understanding your mortgage payments helps with budgeting, comparing loan offers, and making informed decisions about home affordability and loan terms.

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

5. Frequently Asked Questions (FAQ)

Q1: Does this include property taxes and insurance?
A: No, this calculates only principal and interest. Your actual payment may include escrow for taxes and insurance.

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

Q3: What's better - shorter term with higher payments or longer term with lower payments?
A: Shorter terms mean less total interest but higher monthly payments. Longer terms have lower monthly payments but cost more overall.

Q4: How often should I refinance my mortgage?
A: Consider refinancing when interest rates drop significantly (typically 1-2% below your current rate) and you plan to stay in the home long enough to recoup closing costs.

Q5: What's the difference between fixed and adjustable rate mortgages?
A: Fixed-rate mortgages keep the same interest rate for the entire term, while adjustable-rate mortgages (ARMs) have rates that change periodically after an initial fixed period.