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 known as the PMT (payment) formula in financial mathematics.

2. How Does the Calculator Work?

The calculator uses the mortgage payment formula:

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 repayment and interest charges, with interest being front-loaded in the payment schedule.

3. Understanding Mortgage Calculations

Details: Mortgage payments are calculated to ensure the loan is paid off completely by the end of the term, with each payment covering both interest and principal.

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

5. Frequently Asked Questions (FAQ)

Q1: How does interest rate affect my payment?
A: Higher rates increase both your monthly payment and total interest paid. A 1% rate difference can significantly impact long-term costs.

Q2: Should I choose a shorter or longer term?
A: Shorter terms have higher monthly payments but less total interest. Longer terms reduce monthly payments but increase total interest.

Q3: How can I reduce my total interest paid?
A: Making extra principal payments, choosing a shorter term, or securing a lower interest rate will reduce total interest.

Q4: Are property taxes and insurance included?
A: No, this calculates principal and interest only. Actual mortgage payments may include escrow for taxes and insurance.

Q5: What's the difference between fixed and adjustable rates?
A: Fixed rates stay constant; adjustable rates can change periodically, affecting future payments.