1. What is the Mortgage Payment Formula?

The mortgage payment formula calculates the fixed monthly payment required to fully repay a loan over its term, including both principal and interest. This is known as the amortization formula.

2. How Does the Calculator Work?

The calculator uses the standard mortgage formula:

Where:

• \( M \) — Monthly mortgage 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 compound interest over the life of the loan, calculating a fixed payment that pays off both principal and interest over time.

3. Importance of Mortgage Calculation

Details: Understanding your mortgage payments helps with budgeting, comparing loan options, and planning your financial future. It shows how much interest you'll pay over the life of the loan.

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 taxes and insurance?
A: No, this calculates only principal and interest. Your actual payment may include escrow for property 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 better - shorter term or lower rate?
A: Shorter terms mean higher payments but less total interest. Lower rates reduce both payments and total interest. The best choice depends on your budget and goals.

Q4: How often are mortgage payments compounded?
A: Most mortgages use monthly compounding, which this calculator assumes.

Q5: Can I use this for other loans?
A: Yes, this formula works for any fixed-rate, fully amortizing loan (car loans, personal loans, etc.).