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 Bankrate calculator helps compare lenders and understand loan commitments.

2. How Does the Calculator Work?

The calculator uses the standard mortgage formula:

Where:

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

Explanation: The formula accounts for both principal and interest payments over the loan term, with early payments weighted more toward interest.

3. Importance of Mortgage Calculation

Details: Accurate payment calculation helps borrowers budget effectively, compare loan offers, and understand the long-term cost of home financing.

4. Using the Calculator

Tips: Enter principal in USD, annual interest rate as a 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 principal and interest. Actual payments may include escrow for taxes and insurance.

Q2: How does loan term affect payments?
A: Shorter terms mean higher monthly payments but less total interest. A 15-year loan typically has higher payments but lower overall cost than a 30-year loan.

Q3: What's the difference between APR and interest rate?
A: The interest rate is the base cost of borrowing, while APR includes fees and other loan costs for a more complete comparison.

Q4: How much can I borrow?
A: Lenders typically limit payments to 28-31% of gross monthly income, but personal budgets may dictate lower amounts.

Q5: Are there prepayment penalties?
A: Some loans charge fees for early payoff. Always check your loan terms for prepayment clauses.