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. This equation accounts for both principal and interest payments.

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

Explanation: The formula calculates the fixed payment amount that will pay off the loan with interest by the end of the term.

3. Importance of Mortgage Calculation

Details: Accurate mortgage calculations help borrowers understand their financial commitments, compare loan options, 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: Does this include property taxes and insurance?
A: No, this calculates only principal and interest. A complete mortgage payment may include escrow for taxes and insurance.

Q3: What's the difference between term and amortization?
A: Term is the length of the loan agreement, while amortization is the process of paying off the loan through regular payments.

Q4: How does extra principal payment affect the loan?
A: Additional principal payments reduce total interest paid and can shorten the loan term.

Q5: Are there other types of mortgage calculations?
A: Yes, alternative calculations exist for adjustable-rate mortgages, interest-only loans, and balloon payments.