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Mortgage Payment Formula:
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The mortgage payment formula calculates the fixed monthly payment required to fully amortize a loan over its term. This standard formula is used by lenders to determine your monthly mortgage payments.
The calculator uses the mortgage payment formula:
Where:
Explanation: The formula accounts for both principal repayment and interest charges, with the payment amount remaining constant throughout the loan term while the proportion going toward principal increases over time.
Details: Understanding your mortgage payments helps with budgeting, comparing loan offers, and making informed decisions about home affordability. It shows how much you'll pay in interest over the life of the loan.
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 monthly payment, total repayment amount, and total interest paid.
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 (PITI).
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.
Q3: What's the difference between 15-year and 30-year mortgages?
A: Shorter terms have higher monthly payments but much less total interest. A 30-year loan costs more overall but has lower monthly payments.
Q4: How do interest rates affect payments?
A: Even small rate differences significantly impact payments. A 1% higher rate on a $300,000 loan adds ~$180 to monthly payments.
Q5: Can I calculate payments for adjustable-rate mortgages?
A: This calculator is for fixed-rate mortgages only. ARMs have variable payments after the initial fixed period.