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 interest. This is the standard formula used by most lenders for fixed-rate mortgages.

2. How Does the Calculator Work?

The calculator uses the loan repayment formula:

Where:

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

Explanation: The formula accounts for both principal repayment and interest charges over the life of the loan.

3. Importance of Loan Repayment Calculation

Details: Understanding your monthly payment helps with budgeting, comparing loan offers, and determining how much house you can afford.

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. Your actual mortgage payment may include escrow for taxes and insurance.

Q2: How does a larger down payment affect payments?
A: A larger down payment reduces the principal amount (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 additional fees and costs.

Q4: How can I pay off my loan faster?
A: Making additional principal payments or choosing a shorter loan term will reduce total interest paid.

Q5: Are there different types of mortgage calculations?
A: Yes, this is for fixed-rate mortgages. Adjustable-rate mortgages (ARMs) have more complex calculations.