1. What is the Home Loan Payment Formula?

The home loan payment formula calculates the fixed monthly payment (PMT) 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 loan payment formula:

Where:

• \( P \) — Principal loan amount (USD)
• \( r \) — Monthly interest rate (annual rate ÷ 12)
• \( n \) — Number of months (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 the loan exactly by the end of the term.

3. Importance of Extra Payments

Details: Extra payments directly reduce the principal balance, resulting in less interest paid over the life of the loan and potentially shortening the loan term.

4. Using the Calculator

Tips: Enter the loan amount in USD, annual interest rate as a percentage, loan term in years, and optional extra monthly payment. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: How much can extra payments save?
A: Even small extra payments can save thousands in interest and shorten your loan term by years, depending on the loan size and rate.

Q2: Should I pay extra principal or get a shorter term?
A: Paying extra gives flexibility; shorter terms often have lower rates but require higher mandatory payments.

Q3: When do extra payments have the most impact?
A: Early in the loan when more of your payment goes toward interest rather than principal.

Q4: Are there prepayment penalties?
A: Some loans have prepayment penalties - check your loan terms before making extra payments.

Q5: How does this differ from credit card payments?
A: Mortgage payments are amortized (fixed amount), while credit cards typically have minimum payments that vary with balance.