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:

• \( M \) — Monthly mortgage payment
• \( P \) — Principal loan amount
• \( r \) — Monthly interest rate (annual rate ÷ 12)
• \( n \) — Number of payments (loan term in years × 12)

Explanation: The formula calculates the fixed payment needed to pay off the loan including interest over the specified term.

3. Importance of Mortgage Calculation

Details: Understanding your mortgage payments helps with budgeting and financial planning. It shows how much interest you'll pay over the life of the loan.

4. Using the Calculator

Tips: Enter the principal amount, annual interest rate, and loan term in years. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What's included in a typical mortgage payment?
A: This calculates principal and interest. Actual payments may include property taxes, insurance, and PMI if applicable.

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

Q3: What's the difference between interest rate and APR?
A: The interest rate is the cost of borrowing principal. APR includes interest plus other loan fees, representing the true cost of the loan.

Q4: How often are mortgage payments compounded?
A: Most mortgages compound interest monthly, meaning interest is calculated on the outstanding balance each month.

Q5: Can I pay off my mortgage early?
A: Yes, but check for prepayment penalties. Extra payments reduce principal and can significantly shorten your loan term.