Mortgage Payment Formula:
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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.
The calculator uses the standard mortgage formula:
Where:
Explanation: The formula calculates the fixed payment that pays interest and principal over the loan term, with interest being front-loaded in early payments.
Details: Understanding your monthly payment helps with budgeting and comparing loan options. It shows how much interest you'll pay over the loan term.
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.
Q1: Does this include 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 principal, resulting in lower monthly payments.
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 payments?
A: Higher rates increase monthly payments. A 1% rate difference can significantly impact your payment amount.
Q5: Can I pay extra to reduce the term?
A: Yes, additional principal payments reduce total interest and can shorten the loan term.