Money Saving Expert Mortgage Deals

Mortgage Payment Formula:

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

Monthly Payment (PMT):

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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 formula and provides consistent payments throughout the loan term.

2. How Does the Calculator Work?

The calculator uses the mortgage payment formula:

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

Where:

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

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

3. Importance of Mortgage Calculation

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

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

Q2: Can I make overpayments on my mortgage?
A: Most mortgages allow overpayments up to a certain limit each year without penalty, which can reduce the overall interest paid and shorten the loan term.

Q3: What happens if interest rates change?
A: Fixed-rate deals maintain the same rate for the deal period, while variable rates can change. Remortgaging may be an option when deals end.

Q4: How does loan term affect monthly payments?
A: Longer terms mean lower monthly payments but more interest paid overall. Shorter terms have higher payments but less total interest.

Q5: What additional costs should I consider?
A: Besides the monthly payment, consider arrangement fees, valuation fees, legal costs, and potentially higher lending charges for high loan-to-value mortgages.