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 formula accounts for both principal and interest payments.

2. How Does the Calculator Work?

The calculator uses the 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 that pays off the loan with interest over the specified term.

3. Importance of Mortgage Calculation

Details: Understanding your mortgage payments helps with budgeting and financial planning. It shows how much interest you'll pay over the life of the loan and helps compare different loan options.

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. All values must be positive numbers.

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 payments?
A: A larger down payment reduces the principal (P), resulting in lower monthly payments.

Q3: What's the difference between 15-year and 30-year mortgages?
A: 15-year loans have higher monthly payments but much less total interest. 30-year loans have lower payments but more interest over time.

Q4: How does interest rate affect payments?
A: Higher rates increase both monthly payments and total interest paid. Even small rate differences can have big impacts over time.

Q5: Can I pay extra to reduce the loan term?
A: Yes, additional principal payments reduce the loan balance faster and can significantly shorten the loan term.