Home Refinancing Calculator Mortgage Loan

Mortgage Payment Formula:

\[ PMT = P \times \frac{r \times (1 + r)^n}{(1 + r)^n - 1} \]

Monthly Payment (PMT):

Total Payment:

Total Interest:

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1. What is the Mortgage Payment Formula?

The mortgage payment formula calculates the fixed monthly payment required to fully amortize a loan over its term. This is essential for understanding refinancing options and comparing different loan terms.

2. How Does the Calculator Work?

The calculator uses the mortgage payment formula:

\[ PMT = P \times \frac{r \times (1 + r)^n}{(1 + r)^n - 1} \]

Where:

\( PMT \) — Monthly payment
\( P \) — Principal loan amount
\( r \) — Monthly interest rate (annual rate ÷ 12)
\( n \) — Total number of payments (loan term in years × 12)

Explanation: The formula accounts for both principal and interest payments over the life of the loan, with interest being front-loaded in the payment schedule.

3. Importance of Refinancing Calculation

Details: Calculating your potential new mortgage payment helps determine if refinancing makes financial sense by comparing current and proposed loan terms, including potential savings and break-even points.

4. Using the Calculator

Tips: Enter the new loan amount, annual interest rate, and loan term in years. The calculator will show your estimated monthly payment, total payment over the loan term, and total interest paid.

5. Frequently Asked Questions (FAQ)

Q1: Should I refinance my mortgage?
A: Refinancing may make sense if you can get a lower interest rate, shorten your loan term, or switch from an adjustable to fixed-rate mortgage, but consider closing costs.

Q2: How much can I save by refinancing?
A: Savings depend on the rate difference, loan amount, and remaining term. Use this calculator to compare your current payment with potential new payment.

Q3: What's included in a mortgage payment?
A: This calculator shows principal and interest. Actual payments may include property taxes, insurance, and PMI if applicable.

Q4: How does loan term affect payments?
A: Shorter terms mean higher monthly payments but less total interest paid. Longer terms lower monthly payments but increase total interest.

Q5: What are points in mortgage refinancing?
A: Points are upfront fees (1% of loan amount) paid to lower the interest rate. The calculator doesn't account for points or closing costs.