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 is the standard formula used by lenders and financial institutions.

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 accounts for both principal and interest payments, with more interest paid early in the loan term.

3. Importance of Mortgage Calculation

Details: Understanding your monthly payment helps with budgeting, comparing loan offers, and determining how much house you can afford.

4. Using the Calculator

Tips: Enter 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: Does this include property taxes and insurance?
A: No, this calculates only principal and interest. A complete mortgage payment may include taxes, insurance, and PMI.

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'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.

Q4: How often are mortgage payments compounded?
A: Most mortgages use monthly compounding for interest calculations.

Q5: Can I calculate payments for different payment frequencies?
A: This calculator assumes monthly payments. Other frequencies require different calculations.