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 PMT 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 more of each payment going toward interest early in the loan term.

3. Understanding Mortgage Components

Details: Your monthly payment consists of principal, interest, and often includes property taxes and insurance (PITI). This calculator focuses on principal and interest only.

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 and total loan cost.

5. Frequently Asked Questions (FAQ)

Q1: How does interest rate affect my payment?
A: Higher rates significantly increase both monthly payments and total interest paid. A 1% rate difference can add thousands over the loan term.

Q2: 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 cost more overall.

Q3: Are property taxes and insurance included?
A: This calculator shows principal and interest only. Most lenders require escrow for taxes and insurance, which would increase your actual payment.

Q4: How can I pay less interest overall?
A: Make extra principal payments, choose a shorter loan term, or refinance to a lower rate when possible.

Q5: What are current average mortgage rates?
A: Rates vary daily. As of 2023, 30-year fixed rates average around 6-7%, but check current rates for accurate calculations.