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 the principal amount, interest rate, and loan duration.

2. How Does the Calculator Work?

The calculator uses the standard mortgage 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 accounts for both principal repayment and interest charges, with more of each payment going toward interest early in the loan term.

3. Importance of Mortgage Calculation

Details: Understanding your monthly payment helps with budgeting and comparing different loan options. It's essential for financial planning when purchasing a home.

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 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 may also include taxes, insurance, and PMI.

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

Q3: What's the difference between 15-year and 30-year mortgages?
A: 15-year loans have higher monthly payments but much less total interest. 30-year loans have lower payments but more total interest.

Q4: How does interest rate affect the payment?
A: Higher rates increase monthly payments significantly. Even a 0.5% difference can add up over the loan term.

Q5: Can I pay extra to reduce the loan term?
A: Yes, additional principal payments reduce the loan balance faster and can shorten the loan term.