1. What is the Mortgage Payment Formula?

The mortgage payment formula calculates the fixed monthly payment (PMT) required to fully amortize a loan over its term. It accounts for the principal amount, interest rate, and loan duration.

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)

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

3. Importance of Extra Payments

Details: Even small extra payments can significantly reduce the total interest paid and shorten the loan term. This calculator helps visualize these savings.

4. Using the Calculator

Tips: Enter the principal amount, annual interest rate, loan term in years, and optional extra payment. 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 can save thousands in interest and reduce the loan term by several years on a typical mortgage.

Q2: Should I pay extra principal or invest?
A: This depends on your mortgage rate vs. expected investment returns. Paying down debt provides a guaranteed return equal to your interest rate.

Q3: Are there prepayment penalties?
A: Some loans have prepayment penalties - check your loan terms before making extra payments.

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

Q5: Does this work for all loan types?
A: This calculator is designed for fixed-rate mortgages. Adjustable-rate mortgages require more complex calculations.