Mortgage Payment Formula:
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The mortgage payment calculation determines the fixed monthly payment required to fully amortize a loan over its term. This includes both principal and interest payments.
The calculator uses the standard mortgage payment formula:
Where:
Explanation: The formula calculates the fixed payment that pays off the loan exactly over the term, with each payment covering both interest and principal.
Details: Understanding your monthly payment helps with budgeting and comparing different loan options. It's essential for homebuyers to know what they can afford.
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. A complete mortgage payment may also include property taxes and insurance (PITI).
Q2: How does term length affect payment?
A: Longer terms reduce monthly payments but increase total interest paid. Shorter terms have higher payments but lower total cost.
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 for a more complete cost comparison.
Q4: Can I calculate payments for adjustable-rate mortgages?
A: This calculator is for fixed-rate loans only. ARM payments change when the rate adjusts.
Q5: How much can I save by making extra payments?
A: Extra payments reduce principal faster, saving interest and potentially shortening the loan term.