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. This is the standard calculation used by banks and financial institutions.

2. How Does the Calculator Work?

The calculator uses the standard mortgage formula:

Where:

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

Explanation: The formula accounts for both principal repayment and interest charges, with payments structured so the loan is paid off exactly at the end of the term.

3. Importance of Mortgage Calculation

Details: Understanding your mortgage payment helps with budgeting and financial planning. It shows how much goes toward principal vs. interest each month.

4. Using the Calculator

Tips: Enter the principal 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: What's included in a typical mortgage payment?
A: Principal, interest, and often property taxes and insurance (PITI). This calculator shows principal and interest only.

Q2: How does loan term affect payments?
A: Shorter terms mean higher monthly payments but less total interest paid. 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 to borrow principal. APR includes interest plus other loan costs, giving the true cost of the loan.

Q4: How often are mortgage payments compounded?
A: Most mortgages use monthly compounding, which this calculator assumes.

Q5: Can I use this for other types of loans?
A: Yes, it works for any fixed-rate, fully amortizing loan (car loans, personal loans, etc.).