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 mortgage 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 needed to pay off the loan completely by the end of the term, including both principal and interest.

3. Importance of Mortgage Calculation

Details: Understanding your mortgage payment helps with budgeting, comparing loan options, 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 numbers.

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, insurance, and PMI if applicable.

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

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

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

Q5: Are there other types of mortgage calculations?
A: Yes, adjustable-rate mortgages (ARMs) and interest-only loans use different calculations, especially after any introductory periods.