1. What is the Mortgage Calculation?

The mortgage calculation uses compound interest to determine the total amount to be repaid on a home loan, including both principal and interest over the loan term.

2. How Does the Calculator Work?

The calculator uses the compound interest formula:

Where:

• \( A \) — Total amount to be repaid
• \( P \) — Principal loan amount ($)
• \( r \) — Annual interest rate (as decimal)
• \( n \) — Number of compounding periods per year
• \( t \) — Loan term in years

Explanation: The formula accounts for how interest compounds over time, which significantly affects the total repayment amount.

3. Importance of Mortgage Calculation

Details: Understanding the total cost of a mortgage helps borrowers compare loan options, plan their finances, and make informed decisions about home purchases.

4. Using the Calculator

Tips: Enter the principal amount, annual interest rate (as percentage), number of compounding periods per year (typically 12 for monthly), and loan term in years.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between compound and simple interest?
A: Compound interest calculates interest on both principal and accumulated interest, while simple interest only calculates on the principal.

Q2: How does compounding frequency affect the total?
A: More frequent compounding (e.g., monthly vs. annually) results in higher total interest paid over the loan term.

Q3: What's a typical compounding frequency for mortgages?
A: Most mortgages compound interest monthly (n=12).

Q4: Does this calculator include other costs?
A: No, this calculates principal and interest only. Property taxes, insurance, and fees would be additional.

Q5: How can I reduce my total mortgage cost?
A: Making larger down payments (reducing principal), securing lower interest rates, or choosing shorter loan terms will reduce total cost.