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 is the standard formula used by lenders to determine your monthly mortgage payment.

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 accounts for both principal repayment and interest charges, with payments structured so the loan is paid off exactly at the end of the term.

3. Importance of Mortgage Calculation

Details: Understanding your mortgage payments helps with budgeting, comparing loan offers, and making informed decisions about home affordability and refinancing 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 and less total interest paid.

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

Q4: How often are mortgage payments compounded?
A: Mortgage interest is typically compounded monthly in the U.S.

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.