1. What is the Bankrate Mortgage Formula?

The Bankrate mortgage formula calculates the fixed monthly payment required to fully amortize a loan over its term. It's the standard formula used by banks and financial institutions for fixed-rate mortgages.

2. How Does the Calculator Work?

The calculator uses the standard mortgage payment formula:

Where:

• \( P \) — Principal loan amount (USD)
• \( r \) — Monthly interest rate (decimal)
• \( n \) — Number of monthly payments (term in months)

Explanation: The formula accounts for both principal and interest payments over the life of the loan, with more interest paid earlier in the loan term.

3. Importance of Mortgage Calculation

Details: Accurate mortgage calculations help borrowers understand their financial commitments, compare loan offers, and plan their budgets effectively.

4. Using the Calculator

Tips: Enter the loan amount in USD, monthly interest rate as a decimal (e.g., 0.005 for 0.5%), and loan term in months. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: How do I convert APR to monthly rate?
A: Divide the annual percentage rate (APR) by 12 (months) and convert from percentage to decimal (e.g., 6% APR = 0.06/12 = 0.005 monthly rate).

Q2: What's included in the monthly payment?
A: This calculates principal and interest only. Your actual payment may include property taxes, insurance, and PMI if applicable.

Q3: How does loan term affect payments?
A: Longer terms reduce monthly payments but increase total interest paid. Shorter terms have higher payments but lower total interest.

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

Q5: How accurate is this calculator?
A: It provides mathematically exact results for the given inputs, matching bank calculations for fixed-rate loans.