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 mortgage payment formula:

Where:

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

Explanation: The formula accounts for both principal and interest payments over the life of the loan.

3. Importance of Payment Calculation

Details: Knowing your exact mortgage payment helps with budgeting, comparing loan offers, and understanding 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 payment (PITI) would include property taxes, insurance, and possibly PMI.

Q2: How does interest rate affect payment?
A: Higher rates significantly increase monthly payments. A 1% rate increase can raise payments by 10-15% on a 30-year loan.

Q3: What's better - shorter term or lower payment?
A: Shorter terms mean higher payments but less total interest paid. The right choice depends on your financial situation and goals.

Q4: How accurate is this calculator?
A: It provides exact principal+interest payments, matching lender calculations. Actual payments may differ if they include escrow items.

Q5: Can I use this for other types of loans?
A: Yes, this formula works for any fixed-rate, fully amortizing loan (auto loans, personal loans, etc.).