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Mortgage Payment Formula:
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The mortgage payment formula calculates the fixed monthly payment required to repay a loan over a specified term. It's based on the loan principal, interest rate, and loan duration, providing a standardized way to compare different mortgage offers.
The calculator uses the mortgage payment formula:
Where:
Explanation: The formula calculates the fixed monthly payment needed to fully amortize a loan over the specified term, accounting for compound interest.
Details: Comparing mortgage offers using this standardized calculation helps borrowers identify the most cost-effective option, considering both interest rates and loan terms to minimize total repayment amount.
Tips: Enter loan principal in GBP, comparison rate as a decimal (e.g., 0.035 for 3.5%), and loan term in years. All values must be positive numbers.
Q1: What is a comparison rate?
A: A comparison rate includes both the interest rate and most fees and charges, providing a more accurate representation of the true cost of a mortgage.
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: Are there other costs not included in this calculation?
A: Yes, this calculation doesn't include property taxes, insurance, or other additional fees that may be part of your total monthly housing payment.
Q4: Can this calculator be used for different compounding periods?
A: This formula assumes monthly compounding, which is standard for most mortgages in the UK.
Q5: How accurate is this calculation for variable rate mortgages?
A: This calculation is designed for fixed-rate mortgages. Variable rate mortgages would require different calculations as rates change over time.