1. What is the Mortgage Payment Formula?

The mortgage payment formula calculates the monthly principal and interest payment for a fixed-rate mortgage. It's based on the amortization formula that distributes payments evenly over the loan term.

2. How Does the Calculator Work?

The calculator uses the standard mortgage formula:

Where:

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

Explanation: This formula calculates the fixed monthly payment required to fully amortize a loan over its term, considering compound interest.

3. Importance of Mortgage Calculation

Details: Accurate mortgage calculation helps borrowers understand their financial commitment, compare loan offers, and budget effectively for home ownership.

4. Using the Calculator

Tips: Enter the principal amount in dollars, annual interest rate as a percentage, and loan term in years. The calculator will compute your monthly principal and interest payment.

5. Frequently Asked Questions (FAQ)

Q1: Does this include property taxes and insurance?
A: No, this calculation only includes principal and interest. Property taxes, insurance, and PMI are additional costs.

Q2: What is the difference between interest rate and APR?
A: Interest rate is the cost of borrowing principal, while APR includes additional fees and costs expressed as a yearly rate.

Q3: How does loan term affect monthly payments?
A: Longer terms result in lower monthly payments but higher total interest paid over the life of the loan.

Q4: Can I calculate payments for different payment frequencies?
A: This calculator assumes monthly payments. Other frequencies require adjustment of the rate and term calculations.

Q5: What is amortization?
A: Amortization is the process of paying off a debt through regular payments over time, where early payments primarily cover interest and later payments primarily reduce principal.