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:

• \( Principal \) — Original loan amount ($)
• \( Rate \) — Monthly interest rate (annual rate ÷ 12)
• \( n \) — Total number of payments (term in years × 12)

Explanation: The formula calculates the fixed payment that pays off the loan plus interest over the loan term.

3. Importance of Mortgage Calculation

Details: Understanding your monthly payment helps with budgeting and comparing different loan options. It shows how much interest you'll pay over the life of the loan.

4. Using the Calculator

Tips: Enter the loan amount in dollars, annual interest rate (as percentage), 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. Actual mortgage payments often include escrow for property taxes and insurance.

Q2: How does loan term affect payments?
A: Shorter terms mean higher monthly payments but less total interest paid. Longer terms reduce monthly payments but increase total interest.

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, giving a more complete picture of loan cost.

Q4: Can I calculate payments for different payment frequencies?
A: This calculator assumes monthly payments. Bi-weekly or weekly payments would require adjustments to the formula.

Q5: How accurate is this calculator?
A: It provides accurate estimates for fixed-rate mortgages. For adjustable-rate or interest-only loans, different calculations are needed.