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 loan principal, interest rate, and loan duration.

2. How Does the Calculator Work?

The calculator uses the mortgage payment formula:

Where:

• \( PMT \) — Monthly payment amount (USD)
• \( PV \) — Present value or principal loan amount (USD)
• \( r \) — Monthly interest rate (annual rate ÷ 12)
• \( n \) — Total number of payments (loan term in years × 12)

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 monthly mortgage payment helps with budgeting and financial planning when purchasing a home or refinancing.

4. Using the Calculator

Tips: Enter the loan amount in USD, annual interest rate as a percentage, 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. Your actual payment may include escrow for taxes and insurance.

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

Q3: What's the difference between APR and interest rate?
A: The interest rate is the cost of borrowing, while APR includes fees and other loan costs.

Q4: How much will I pay in total interest?
A: Total interest = (PMT × n) - PV. This shows the full cost of borrowing.

Q5: Can I calculate payments for different loan types?
A: This formula works for fixed-rate mortgages. ARMs or interest-only loans require different calculations.