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:

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

Explanation: The formula calculates the fixed payment that pays interest and principal over the loan term, with interest being front-loaded in early payments.

3. Importance of Mortgage Calculation

Details: Understanding your mortgage payment helps with budgeting, comparing loan options, and planning for home ownership costs including taxes and insurance.

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

Q2: How does interest rate affect payment?
A: Higher rates increase monthly payments significantly. A 1% rate difference can change payments by $50-$100 per $100,000 borrowed.

Q3: What's better - 15-year or 30-year mortgage?
A: 15-year has higher payments but less total interest. 30-year offers lower payments but more interest over time.

Q4: How much can I borrow?
A: Lenders typically allow 28-31% of gross income for housing payments, but this varies by lender and other factors.

Q5: Are there prepayment penalties?
A: Most modern mortgages don't have prepayment penalties, but check your loan terms as some loans may charge for early payoff.