Bankrate Loan Calculator Mortgage Payment

Mortgage Payment Formula:

\[ PMT = P \times \frac{r \times (1 + r)^n}{(1 + r)^n - 1} \]

Monthly Payment (PMT):

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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 standard formula is used by banks and financial institutions to determine mortgage payments.

2. How Does the Calculator Work?

The calculator uses the mortgage payment formula:

\[ PMT = P \times \frac{r \times (1 + r)^n}{(1 + r)^n - 1} \]

Where:

\( P \) — Principal loan amount (USD)
\( r \) — Monthly interest rate (annual rate ÷ 12)
\( n \) — Number of monthly payments (term in years × 12)
\( PMT \) — Monthly payment amount (USD)

Explanation: The formula accounts for both principal repayment and interest charges, with payments remaining constant throughout the loan term while the proportion allocated to principal vs. interest changes over time.

3. Importance of Mortgage Calculation

Details: Accurate mortgage payment calculation helps borrowers understand their financial commitments, compare loan options, and budget effectively for home ownership.

4. Using the Calculator

Tips: Enter the principal amount in USD, annual interest rate in percentage, 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 the principal and interest payment (P&I). Your actual payment may include additional amounts for taxes and insurance (PITI).

Q2: How does a larger down payment affect the payment?
A: A larger down payment reduces the principal amount (P), which directly lowers your monthly payment.

Q3: What's the difference between APR and interest rate?
A: The interest rate is the base cost of borrowing, while APR includes additional fees and costs to show the total annual cost of the loan.

Q4: How much can I save by making extra payments?
A: Extra payments reduce principal faster, saving interest and potentially shortening the loan term. Use an amortization calculator to see specific savings.

Q5: Are there different types of mortgage calculations?
A: This is for fixed-rate mortgages. Adjustable-rate mortgages (ARMs) use different calculations that account for rate changes over time.