Money Saving Expert Find A Mortgage

Mortgage Payment Formula:

\[ PMT = P \times \frac{r}{12} \times (1 + \frac{r}{12})^{12 \times t} \div \left[ (1 + \frac{r}{12})^{12 \times t} - 1 \right] \]

Monthly Payment (PMT):

Unit Converter ▲

Unit Converter ▼

From:	To:

1. What Is The Mortgage Payment Formula?

The mortgage payment formula calculates the fixed monthly payment required to repay a loan over a specified term at a given interest rate. It's based on the amortization principle where each payment covers both interest and principal.

2. How Does The Calculator Work?

The calculator uses the mortgage payment formula:

\[ PMT = P \times \frac{r}{12} \times (1 + \frac{r}{12})^{12 \times t} \div \left[ (1 + \frac{r}{12})^{12 \times t} - 1 \right] \]

Where:

\( PMT \) — Monthly payment (GBP)
\( P \) — Loan principal amount (GBP)
\( r \) — Annual interest rate (decimal)
\( t \) — Loan term in years

Explanation: The formula calculates the fixed monthly payment needed to fully amortize a loan over the specified term, accounting for compound interest.

3. Importance Of Mortgage Calculation

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

4. Using The Calculator

Tips: Enter the loan amount in GBP, annual interest rate as a decimal (e.g., 0.05 for 5%), and loan term in years. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What is the difference between interest rate and APR?
A: The interest rate is the cost of borrowing the principal, while APR includes additional fees and costs, giving a more comprehensive cost comparison.

Q2: How does loan term affect monthly payments?
A: Longer terms result in lower monthly payments but higher total interest paid over the life of the loan.

Q3: Can I make extra payments to pay off my mortgage faster?
A: Many mortgages allow extra payments which reduce the principal and can significantly shorten the loan term and reduce total interest.

Q4: What is an amortization schedule?
A: A table showing the breakdown of each payment into principal and interest components over the life of the loan.

Q5: Are there different types of mortgage interest rates?
A: Yes, including fixed-rate (constant throughout term), variable-rate (can fluctuate), and tracker rates (linked to base rate).