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 lenders and financial institutions.

2. How Does the Calculator Work?

The calculator uses the mortgage payment 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)

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

3. Importance of Mortgage Calculation

Details: Understanding your monthly payment helps with budgeting and comparing different loan options. It's essential for homebuyers to know what they 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 payment may include escrow for taxes and insurance.

Q2: How does a higher interest rate affect payments?
A: Even small rate increases significantly raise monthly payments and total interest paid over the loan term.

Q3: What's the difference between 15-year and 30-year mortgages?
A: 15-year loans have higher monthly payments but much less total interest. 30-year loans have lower payments but more interest overall.

Q4: Can I calculate payments for other types of loans?
A: Yes, this formula works for any fixed-rate amortizing loan (car loans, personal loans, etc.).

Q5: How accurate is this calculator?
A: It provides exact calculations for fixed-rate loans. Adjustable-rate mortgages would require more complex calculations.