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. It accounts for both principal and interest payments, providing a consistent payment amount throughout the loan period.

2. How Does the Calculator Work?

The calculator uses the standard mortgage formula:

Where:

• \( P \) — Loan principal amount (USD)
• \( r \) — Monthly interest rate (annual rate ÷ 12)
• \( n \) — Total number of payments (loan term in years × 12)

Explanation: The formula calculates the fixed payment that pays off the loan principal plus interest over the specified term.

3. Importance of Mortgage Calculation

Details: Accurate mortgage calculations are essential for budgeting, comparing loan options, and understanding the long-term financial commitment of a property purchase.

4. Using the Calculator

Tips: Enter the loan amount in USD, annual interest rate as a percentage (e.g., 3.5 for 3.5%), and loan term in years. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Does this include property taxes and insurance?
A: No, this calculates only principal and interest. A complete mortgage payment typically includes taxes and insurance (PITI).

Q2: How does loan term affect payments?
A: Shorter terms mean higher monthly payments but less total interest paid. Longer terms reduce monthly payments but increase total interest.

Q3: What's the difference between APR and interest rate?
A: The interest rate is the base cost of borrowing, while APR includes fees and other loan costs to show the true annual cost.

Q4: Can I calculate payments for adjustable-rate mortgages?
A: This calculator is for fixed-rate mortgages only. ARM payments change when the rate adjusts.

Q5: How much can I save by making extra payments?
A: Extra payments reduce principal faster, saving interest and potentially shortening the loan term.