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 is commonly used for promissory notes, mortgages, and other installment loans.

2. How Does the Calculator Work?

The calculator uses the standard mortgage payment formula:

Where:

• \( PMT \) — Monthly payment amount
• \( P \) — Principal loan amount (USD)
• \( r \) — 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, calculating a fixed payment that will pay off the loan exactly by the end of the term.

3. Importance of Mortgage Calculation

Details: Accurate mortgage calculation helps borrowers understand their repayment obligations, compare loan offers, and plan their finances effectively.

4. Using the Calculator

Tips: Enter the principal amount in USD, 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 property taxes and insurance?
A: No, this calculates only the principal and interest payment (P&I). Your actual mortgage payment may include escrow for taxes and insurance.

Q2: How does loan term affect the payment?
A: Longer terms reduce monthly payments but increase total interest paid. Shorter terms have higher payments but lower 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 to show the true annual cost.

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

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