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 the standard formula used by banks and financial institutions for fixed-rate mortgages.

2. How Does the Calculator Work?

The calculator uses the mortgage payment formula:

Where:

• \( PMT \) — Monthly payment
• \( P \) — Principal loan amount
• \( r \) — Monthly interest rate (annual rate ÷ 12)
• \( n \) — Number of payments (loan term in months)

Explanation: The formula accounts for both principal repayment and interest charges, with the payment amount remaining constant throughout the loan term.

3. Understanding Mortgage Payments

Details: Each payment consists of both interest and principal components. Early in the loan, most of the payment goes toward interest. Over time, the principal portion increases while the interest portion decreases.

4. Using the Calculator

Tips: Enter the loan amount, annual interest rate, and loan term (in years or months). The calculator will show your monthly payment, total repayment amount, and total interest paid over the life of the loan.

5. Frequently Asked Questions (FAQ)

Q1: What's included in a typical mortgage payment?
A: This calculator shows principal and interest. Actual payments may also include property taxes, homeowners insurance, and PMI if applicable.

Q2: How does a longer loan term affect payments?
A: Longer terms reduce monthly payments but increase total interest paid over the life of the loan.

Q3: What's the difference between interest rate and APR?
A: The interest rate is the cost of borrowing principal. APR includes interest plus other loan fees, representing the true cost of the loan.

Q4: How can I pay less interest overall?
A: Make extra principal payments, choose a shorter loan term, or secure a lower interest rate.

Q5: Does this work for adjustable-rate mortgages (ARMs)?
A: No, this calculator is for fixed-rate mortgages only. ARM payments change when the interest rate adjusts.