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. It's essential for home buyers to understand their financial commitments when moving home.

2. How Does the Calculator Work?

The calculator uses the mortgage payment formula:

Where:

• \( P \) — Principal loan amount ($)
• \( r \) — Monthly interest rate (decimal)
• \( n \) — Number of monthly payments

Explanation: The formula accounts for both principal and interest payments over the loan term, with payments remaining constant while the principal/interest ratio changes over time.

3. Importance of Mortgage Calculation

Details: Accurate mortgage calculation helps home buyers budget effectively, compare loan options, and understand the long-term cost of home ownership.

4. Using the Calculator

Tips: Enter the principal amount in dollars, monthly interest rate as a decimal (e.g., 0.005 for 0.5%), and loan term in months. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: How do I convert APR to monthly rate?
A: Divide the annual percentage rate by 12 (months) and by 100 (to convert to decimal). For example, 6% APR = 0.06/12 = 0.005 monthly.

Q2: 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.

Q3: 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.

Q4: Are there other mortgage types?
A: Yes, including adjustable-rate mortgages (ARMs) and interest-only loans. This calculator is for fixed-rate mortgages.

Q5: Should I include closing costs?
A: Closing costs are separate from the loan amount. They typically range from 2-5% of the home's purchase price.