1. What is the Loan Payment Formula?

The loan payment formula calculates the fixed monthly payment required to fully repay a loan over its term, including both principal and interest components.

2. How Does the Calculator Work?

The calculator uses the standard loan payment formula:

Where:

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

Explanation: The formula accounts for compound interest over the life of the loan, calculating a fixed payment that covers both principal and interest each month.

3. Importance of Payment Calculation

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

4. Using the Calculator

Tips: Enter the loan amount in USD, 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 property taxes and insurance?
A: No, this calculates only principal and interest. A complete mortgage payment may also include taxes, insurance, and PMI.

Q2: How does a larger down payment affect payments?
A: A larger down payment reduces the principal (P), resulting in lower monthly payments.

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 will I pay in total interest?
A: Total interest = (Monthly Payment × Number of Payments) - Principal.

Q5: Can I reduce my total interest paid?
A: Yes, by making additional principal payments, choosing a shorter term, or securing a lower interest rate.