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:

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

Explanation: The formula calculates the fixed payment that pays off the loan in exactly n payments, with each payment covering both interest and principal.

3. Importance of Mortgage Calculation

Details: Understanding your monthly payment helps with budgeting and financial planning when purchasing property. It allows you to compare different loan options.

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 annual rate to monthly?
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).

Q2: What's included in a typical mortgage payment?
A: This calculator shows principal and interest only. Actual payments may include property taxes, insurance, and PMI.

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: What's the difference between interest rate and APR?
A: Interest rate is the cost of borrowing principal, while APR includes fees and other loan costs.

Q5: Can I use this for other loans?
A: Yes, this formula works for any fixed-rate, fully amortizing loan (car loans, personal loans, etc.).