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 payment formula:

Where:

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

Explanation: The formula calculates the fixed payment that pays interest and principal over the loan term, with interest costs highest at the beginning.

3. Importance of Mortgage Calculation

Details: Understanding your monthly payment helps with budgeting, comparing loan offers, and planning for home ownership costs.

4. Using the Calculator

Tips: Enter principal in dollars, interest rate as a percentage (e.g., 3.5 for 3.5%), and term in months. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Should I use annual or monthly rate?
A: The calculator expects the monthly rate. Divide your annual rate by 12 (e.g., 6% annual = 0.5% monthly).

Q2: Does this include taxes and insurance?
A: No, this calculates only principal and interest. Your actual payment may include escrow for taxes and insurance.

Q3: How does loan term affect payments?
A: Longer terms reduce monthly payments but increase total interest paid. Shorter terms have higher payments but lower total cost.

Q4: What's the difference between fixed and adjustable rates?
A: This calculator assumes a fixed rate. Adjustable rates would require more complex calculations as rates change.

Q5: How accurate is this calculator?
A: It provides precise calculations for fixed-rate loans, but actual lender payments may vary slightly due to rounding methods.