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 mortgage payment formula:

Where:

• \( PMT \) — Monthly payment (USD)
• \( PV \) — Loan amount or principal (USD)
• \( r \) — Monthly interest rate (decimal)
• \( n \) — Total number of payments (months)

Explanation: The formula calculates the fixed payment needed to pay off the loan over its term, with each payment covering both interest and principal.

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 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 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 the interest rate affect payments?
A: Higher rates increase monthly payments significantly. A 1% rate increase can raise payments by 10-15% on a 30-year loan.

Q3: What's better - shorter term or lower payment?
A: Shorter terms have higher payments but less total interest. Choose based on your budget and financial goals.

Q4: How much can I save by making extra payments?
A: Even small extra payments can save thousands in interest and shorten the loan term significantly.

Q5: Are there different types of mortgage calculations?
A: Yes, this calculates fixed-rate mortgages. ARMs and interest-only loans use different calculations.