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 standard equation accounts for principal, interest rate, and loan duration.

2. How Does the Calculator Work?

The calculator uses the mortgage payment formula:

Where:

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

Explanation: The formula calculates the fixed payment that pays off the loan with interest by the end of the term, with more going toward interest early in the loan.

3. Importance of Mortgage Calculation

Details: Understanding your monthly payment helps with budgeting, comparing loan offers, and determining how much house you can afford.

4. Using the Calculator

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. All values must be positive.

5. Frequently Asked Questions (FAQ)

Q1: Does this include taxes and insurance?
A: No, this calculates only principal and interest. Your actual payment may include property taxes and insurance (PITI).

Q2: How does a larger down payment affect payments?
A: A larger down payment reduces the principal (P), resulting in lower monthly payments.

Q3: What's the difference between 15-year and 30-year mortgages?
A: Shorter terms have higher monthly payments but much less total interest paid over the life of the loan.

Q4: How does interest rate affect payments?
A: Even small rate changes significantly impact monthly payments. A 1% rate increase can raise payments by 10-15%.

Q5: Can I calculate payments for adjustable-rate mortgages?
A: This calculator works for fixed-rate loans only. ARM payments will change when the rate adjusts.