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Mortgage Payment Formula:
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The mortgage payment formula calculates the fixed monthly payment required to fully amortize a loan over its term. It accounts for the principal amount, interest rate, and loan duration to determine consistent payments.
The calculator uses the standard mortgage formula:
Where:
Explanation: The formula calculates the fixed payment needed to pay off the loan in full, including interest, by the end of the term.
Details: Understanding your mortgage payments helps in budgeting for a new home, comparing loan options, and planning your financial future when moving house.
Tips: Enter the total loan 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.
Q1: How do I convert annual rate to monthly?
A: Divide the annual percentage rate by 12 (months) and convert from percentage to decimal (e.g., 6% annual = 0.06/12 = 0.005 monthly).
Q2: Does this include property taxes and insurance?
A: No, this calculates principal and interest only. Your actual payment may include escrow for taxes and insurance.
Q3: What's better - shorter term with higher payments or longer term?
A: Shorter terms mean less total interest paid but higher monthly payments. Choose based on your budget and how long you plan to stay in the home.
Q4: How does moving house affect my mortgage?
A: When moving, you may need a new mortgage unless you're keeping your current home. This calculator helps estimate payments for your new home loan.
Q5: Can I estimate total interest paid?
A: Yes, multiply the monthly payment by number of payments, then subtract the principal to get total interest.