1. What is the Mortgage Payment Formula?

The mortgage payment formula calculates the fixed monthly payment required to fully amortize a loan over its term. It accounts for both principal and interest components of the payment.

2. How Does the Calculator Work?

The calculator uses the standard mortgage formula:

Where:

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

Extra Payments: The calculator also shows how additional payments reduce the loan term and total interest paid.

3. Importance of Extra Payments

Details: Even small extra payments can significantly reduce the loan term and total interest. For example, an extra $100/month on a $300,000 loan at 4% can save over $25,000 in interest and pay off the loan 5 years early.

4. Using the Calculator

Tips: Enter the loan amount, interest rate, and term. Optionally add an extra monthly payment to see how it affects your loan. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: How do extra payments affect my loan?
A: Extra payments are applied directly to principal, reducing both the loan term and total interest paid.

Q2: Should I pay extra each month or make lump sum payments?
A: Regular extra payments have a greater impact than occasional lump sums due to compounding interest savings.

Q3: Does this calculator account for property taxes and insurance?
A: No, it calculates only principal and interest. Your actual payment may include escrow for taxes and insurance.

Q4: What's better - shorter term or extra payments on a longer term?
A: Shorter terms typically have lower rates but higher required payments. Extra payments on longer terms offer more flexibility.

Q5: How accurate is this calculator?
A: It provides accurate estimates for fixed-rate loans. For adjustable-rate or interest-only loans, consult your lender.