1. What is the Mortgage Payment Formula?

The mortgage payment formula calculates the fixed monthly payment required to fully amortize a loan over its remaining term. It accounts for the current loan balance, interest rate, and remaining term.

2. How Does the Calculator Work?

The calculator uses the mortgage payment formula:

Where:

• \( B \) — Current loan balance ($)
• \( r \) — Monthly interest rate (annual rate ÷ 12)
• \( remaining\ n \) — Remaining term in months

Explanation: The formula calculates the fixed payment needed to pay off the loan over the remaining term, with each payment covering both interest and principal.

3. Importance of Mortgage Calculation

Details: Understanding your mortgage payment helps with budgeting, refinancing decisions, and assessing the impact of additional payments on your loan term.

4. Using the Calculator

Tips: Enter current loan balance in dollars, annual interest rate as a percentage, and remaining term in months. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Why calculate from current balance instead of original loan amount?
A: Calculating from current balance gives you an accurate payment for your remaining loan, accounting for any principal you've already paid down.

Q2: How does extra payment affect my mortgage?
A: Extra payments reduce principal faster, decreasing total interest paid and potentially shortening your loan term.

Q3: What's the difference between interest rate and APR?
A: The interest rate is the cost of borrowing, while APR includes fees and other loan costs to show the true annual cost.

Q4: Should I refinance my mortgage?
A: Consider refinancing if current rates are significantly lower than your existing rate and you plan to stay in the home long enough to recoup closing costs.

Q5: How does loan term affect payments?
A: Shorter terms have higher monthly payments but lower total interest costs, while longer terms have lower payments but higher total interest.