1. What is the Mortgage Payment Formula?

The mortgage payment formula calculates the fixed monthly payment required to pay off a loan over a specified term, including both principal and interest components.

2. How Does the Calculator Work?

The calculator uses the mortgage payment formula:

Where:

• \( PMT \) — Monthly payment (currency)
• \( P \) — Loan principal (currency)
• \( r \) — Annual interest rate (decimal)
• \( t \) — Loan term in years (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 payment calculation is essential for financial planning, budgeting, and comparing different loan options to make informed borrowing decisions.

4. Using the Calculator

Tips: Enter loan principal in currency units, 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 included in the monthly payment?
A: This calculation includes principal and interest only. Additional costs like property taxes, insurance, and PMI are not included.

Q2: How does interest rate affect the payment?
A: Higher interest rates result in higher monthly payments, as more money goes toward interest rather than principal reduction.

Q3: What is the difference between fixed and adjustable rates?
A: Fixed rates remain constant throughout the loan term, while adjustable rates can change periodically, affecting future payments.

Q4: How does loan term impact the payment?
A: Longer terms result in lower monthly payments but higher total interest paid over the life of the loan.

Q5: Can I calculate payments for extra payments?
A: This calculator shows the standard payment. Extra payments would require a separate amortization schedule to see their impact.