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. This formula accounts for both principal and interest payments.

2. How Does the Calculator Work?

The calculator uses the standard mortgage formula:

Where:

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

Explanation: The formula calculates the fixed payment that will pay off the loan with interest by the end of the term.

3. Importance of Mortgage Calculation

Details: Understanding your monthly payment helps with budgeting and determining how much house you can afford. It's essential for financial planning when purchasing a home.

4. Using the Calculator

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.

5. Frequently Asked Questions (FAQ)

Q1: Does this include property taxes and insurance?
A: No, this calculates only principal and interest. Your actual monthly payment may include escrow for taxes and insurance.

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 - 15-year or 30-year mortgage?
A: 15-year loans have higher payments but less total interest. 30-year loans have lower payments but cost more overall.

Q4: How much should my payment be relative to income?
A: Most lenders recommend keeping housing payments below 28% of gross monthly income.

Q5: Can I pay extra to reduce the term?
A: Yes, additional principal payments reduce total interest and can shorten the loan term.