1. What is the Loan Repayment Formula?

The loan repayment formula calculates the fixed monthly payment required to fully repay a loan over its term, including both principal and interest. This is known as the PMT (payment) formula in financial mathematics.

2. How Does the Calculator Work?

The calculator uses the PMT 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 compound interest over the life of the loan, calculating a fixed payment that will pay off both principal and interest by the end of the term.

3. Importance of Loan Calculation

Details: Understanding your potential loan payments helps with budgeting, comparing loan offers, and making informed decisions about home affordability.

4. Using the Calculator

Tips: Enter the loan amount in dollars, 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 typically includes taxes and insurance (PITI).

Q2: How does a larger down payment affect payments?
A: A larger down payment reduces the principal amount, resulting in lower monthly payments and less total interest paid.

Q3: What's the difference between 15-year and 30-year mortgages?
A: 15-year loans have higher monthly payments but much less total interest. 30-year loans have lower payments but more total interest.

Q4: How does interest rate affect payments?
A: Higher rates increase both monthly payments and total interest paid. Even small rate differences can have large impacts over time.

Q5: Are there other loan types with different calculations?
A: Yes, adjustable-rate mortgages (ARMs) and interest-only loans have different payment structures not reflected in this calculator.