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Home Loan Calculator With Repayment

Loan Payment Formula:

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

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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. This is known as the PMT (payment) formula in finance.

2. How Does the Calculator Work?

The calculator uses the PMT formula:

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

Where:

Explanation: The formula accounts for compound interest over the life of the loan, ensuring each payment covers both principal and interest.

3. Importance of Loan Calculation

Details: Understanding your monthly payment helps with budgeting and comparing different loan options. It also shows the total cost of borrowing.

4. Using the Calculator

Tips: Enter the loan 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 principal and interest. A complete mortgage payment may include taxes and insurance (PITI).

Q2: How does loan term affect payments?
A: Shorter terms mean higher monthly payments but less total interest. Longer terms reduce monthly payments but increase total interest.

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

Q4: Can I pay extra to reduce the term?
A: Yes, additional principal payments can shorten your loan term and reduce total interest, but check for prepayment penalties.

Q5: How often is interest compounded?
A: For most mortgages, interest is compounded monthly, meaning interest is calculated on the outstanding balance each month.

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