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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. It accounts for the principal amount, interest rate, and loan duration to determine the periodic payment amount.
The calculator uses the mortgage payment formula:
Where:
Explanation: The formula calculates the fixed payment that will pay off the loan with interest by the end of the term, with each payment covering both principal and interest.
Details: Understanding your mortgage payment helps with budgeting, comparing loan offers, and making informed decisions about home affordability and loan terms.
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 estimated monthly payment, total payment over the loan term, 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.
Q2: How does a larger down payment affect my payment?
A: A larger down payment reduces the principal amount, resulting in lower monthly payments and less total interest.
Q3: What's the difference between 15-year and 30-year mortgages?
A: 15-year loans have higher monthly payments but much less total interest. 30-year loans have lower payments but more interest over time.
Q4: How do points affect my rate?
A: Points (prepaid interest) can lower your rate but increase upfront costs. Each point typically costs 1% of the loan amount and lowers the rate by ~0.25%.
Q5: Can I pay extra to pay off my loan early?
A: Yes, extra payments directly reduce principal, saving interest and potentially shortening the loan term.