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Loan Payment Formula:
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The loan payment formula calculates the fixed monthly payment required to fully repay a loan over its term, including both principal and interest. This is the standard formula used by most mortgage and loan calculators.
The calculator uses the loan payment formula:
Where:
Explanation: The formula accounts for compound interest over the life of the loan, calculating a fixed payment that will pay off both principal and interest by the end of the term.
Details: Understanding your monthly payment helps with budgeting and determining how much house you can afford. It also shows how interest rates and loan terms affect your payments.
Tips: Enter the loan amount in USD, annual interest rate as a percentage (e.g., 4.5 for 4.5%), and loan term in years. All values must be positive numbers.
Q1: Does this include property taxes and insurance?
A: No, this calculates only principal and interest. Your actual mortgage payment may include escrow for taxes and insurance.
Q2: How does a larger down payment affect the payment?
A: A larger down payment reduces the principal amount (P), resulting in a lower monthly payment.
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 total interest.
Q4: How do interest rates affect payments?
A: Even small rate changes can significantly impact monthly payments. A 1% rate increase could raise payments by 10% or more.
Q5: Can I calculate how much goes to principal vs interest?
A: Yes, you can create an amortization schedule that breaks down each payment's principal and interest components.