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 needed to pay off the loan over its term, with each payment covering both interest and principal.

3. Importance of Mortgage Calculation

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

4. Using the Calculator

Tips: Enter the loan amount, annual interest rate, and loan term in years. The calculator will show your 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 interest rate affect payments?
A: Higher rates increase both monthly payments and total interest paid over the life of the loan.

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

Q4: How can I reduce my total interest paid?
A: Make extra principal payments, choose a shorter term, or refinance to a lower rate when possible.

Q5: Are there other types of mortgages?
A: Yes, adjustable-rate mortgages (ARMs) have variable rates, and interest-only loans have different payment structures.