Home
Back
Mortgage Payment Formula:
| From: | To: |
The mortgage payment formula calculates the fixed monthly payment required to fully amortize a loan over its term. It accounts for the principal amount, interest rate, and loan duration to determine the periodic payment.
The calculator uses the standard mortgage payment formula:
Where:
Explanation: The formula calculates the fixed payment that covers both principal and interest each month, resulting in the loan being paid off exactly at the end of the term.
Details: Comparing different interest rates helps borrowers understand how small rate differences can significantly impact monthly payments and total interest paid over the life of the loan.
Tips: Enter the loan amount, loan term in years, and two different interest rates to compare. The calculator will show monthly payments for each rate, their difference, and the total interest difference over the full loan term.
Q1: How does a 0.5% rate difference affect payments?
A: On a $300,000 30-year loan, a 0.5% higher rate increases monthly payments by about $90 and total interest by $32,000.
Q2: Should I choose a lower rate with higher fees?
A: Compare the total cost (interest + fees) over your expected ownership period. Use the calculator to evaluate break-even points.
Q3: How does loan term affect payments?
A: Shorter terms have higher monthly payments but much lower total interest. A 15-year loan typically has about 60% of the total interest of a 30-year loan.
Q4: Are property taxes and insurance included?
A: No, this calculates only principal and interest. Actual mortgage payments often include escrow for taxes and insurance.
Q5: How accurate is this calculator?
A: It provides precise calculations for fixed-rate loans. For ARMs or loans with PMI, consult a mortgage professional.