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 standard mortgage payment formula:

Where:

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

Explanation: The formula accounts for both principal repayment and interest charges, with payments structured so the loan is paid off exactly at term's end.

3. Importance of Mortgage Calculation

Details: Accurate payment calculation is essential for budgeting, loan comparison, and understanding the full cost of borrowing. It helps determine affordability and total interest paid over the loan term.

4. Using the Calculator

Tips: Enter the loan amount in dollars, annual interest rate as a percentage (e.g., 3.5 for 3.5%), and loan term in years. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Does this include taxes and insurance?
A: No, this calculates only principal and interest. Actual payments may include escrow for property taxes and insurance.

Q2: How does loan term affect payments?
A: Shorter terms mean higher monthly payments but less total interest. Longer terms reduce monthly payments but increase total interest.

Q3: What's the difference between APR and interest rate?
A: The interest rate is the base cost of borrowing, while APR includes fees and other loan costs for a more complete cost comparison.

Q4: Can I use this for other types of loans?
A: Yes, this formula works for any fixed-rate, fully amortizing loan (car loans, personal loans, etc.).

Q5: How accurate is this calculator?
A: It provides exact results for fixed-rate loans. Adjustable-rate mortgages would require more complex calculations.