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

Explanation: The formula calculates the fixed payment needed to pay off the loan in full, including interest, by the end of the term.

3. Importance of Mortgage Calculation

Details: Accurate mortgage calculations help borrowers understand their financial commitments, compare loan options, and budget effectively for 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 annual rate to monthly?
A: Divide the annual percentage rate (APR) by 12 (months) and by 100 to convert to decimal. Example: 6% APR = 0.06/12 = 0.005 monthly.

Q2: Does this include taxes and insurance?
A: No, this calculates only principal and interest. Your actual payment may include escrow for taxes and insurance.

Q3: What's a typical mortgage term?
A: Common terms are 15 years (180 months) or 30 years (360 months), but other terms are available.

Q4: How does extra principal payment affect the loan?
A: Extra payments reduce principal faster, saving interest and potentially shortening the loan term.

Q5: What's the difference between interest rate and APR?
A: The interest rate is the cost of borrowing, while APR includes additional fees and costs to show the true annual cost.