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. The formula accounts for the principal amount, interest rate, and loan duration.

2. How Does the Calculator Work?

The calculator uses the standard mortgage payment formula:

Where:

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

Explanation: The formula calculates the fixed payment that pays interest and principal over the loan term, with extra payments applied directly to principal reduction.

3. Importance of Extra Payments

Details: Extra payments reduce the principal faster, decreasing total interest paid and potentially shortening the loan term. Even small extra payments can have significant long-term effects.

4. Using the Calculator

Tips: Enter the loan amount, interest rate, and term. Optionally add extra monthly payments to see how they affect your amortization schedule. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: How much can I save with extra payments?
A: Even $100 extra per month on a $300,000 loan at 4% can save ~$28,000 in interest and pay off the loan 4 years early.

Q2: Should I pay extra principal or refinance?
A: Compare savings from extra payments versus refinancing costs. Extra payments provide guaranteed returns equal to your loan rate.

Q3: Are there prepayment penalties?
A: Most modern mortgages don't have prepayment penalties, but check your loan terms to be sure.

Q4: How often should I make extra payments?
A: Regular extra payments (monthly) are most effective, but even annual lump sums can help reduce principal.

Q5: Does this calculator account for escrow?
A: No, this calculates principal and interest only. Your actual payment may include taxes and insurance.