1. What is a Mortgage Calculator?

A mortgage calculator helps you estimate your monthly mortgage payments based on the loan amount, interest rate, and loan term. It's an essential tool for home buyers to plan their finances.

2. How Does the Calculator Work?

The calculator uses the standard mortgage formula:

Where:

• \( M \) — Monthly mortgage payment
• \( P \) — Principal loan amount
• \( r \) — Monthly interest rate (annual rate divided by 12)
• \( n \) — Number of payments (loan term in years multiplied by 12)

Explanation: The formula calculates the fixed monthly payment required to fully amortize the loan over its term.

3. Importance of Mortgage Calculation

Details: Understanding your mortgage payments helps in budgeting, comparing loan options, and determining how much house you can afford.

4. Using the Calculator

Tips: Enter the loan amount in dollars, 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: What's included in a mortgage payment?
A: Typically includes principal, interest, property taxes, and insurance (PITI). This calculator shows principal and interest only.

Q2: How does loan term affect payments?
A: Shorter terms mean higher monthly payments but less total interest paid over the life of the loan.

Q3: What is amortization?
A: The process of paying off a loan through regular payments over time, where early payments are mostly interest and later payments are mostly principal.

Q4: How accurate is this calculator?
A: It provides a good estimate but doesn't account for PMI, taxes, insurance, or variable rate loans.

Q5: Should I get a fixed or adjustable rate mortgage?
A: Fixed rates offer stability; adjustable rates may start lower but can increase. Consider your financial situation and how long you plan to stay in the home.