1. What is the Mortgage Payment Formula?

The mortgage payment formula calculates your fixed monthly payment based on the loan amount, interest rate, and loan term. It accounts for both principal and interest payments over the life of the loan.

2. How Does the Calculator Work?

The calculator uses the standard mortgage formula:

Where:

• \( p \) — Loan principal amount ($)
• \( r \) — Monthly interest rate (annual rate ÷ 12)
• \( n \) — Total number of payments (term in years × 12)

Explanation: The formula calculates the fixed payment needed to completely pay off the loan by the end of the term, accounting for compound interest.

3. Importance of Early Payoff

Details: Making extra payments reduces the principal faster, which decreases the total interest paid and can significantly shorten the loan term. Even small additional amounts can have a big impact over time.

4. Using the Calculator

Tips: Enter the loan amount, interest rate (as a percentage), and loan term in years. Optionally add an extra monthly payment to see how much you can save in interest and time.

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 your loan term by several years, depending on your loan details.

Q2: Should I pay extra principal or refinance?
A: If your rate is already low, extra payments may be better. If rates have dropped significantly, refinancing might save more.

Q3: Are there prepayment penalties?
A: Most modern mortgages don't have them, but check your loan documents to be sure.

Q4: When is the best time to make extra payments?
A: Earlier in the loan term has the biggest impact, but any time helps.

Q5: How does this compare to biweekly payments?
A: Biweekly payments (half every 2 weeks) result in one extra monthly payment per year, which can also reduce your term and interest.