Union Savings Bank Mortgage Rates Calculator

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):

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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. This formula accounts for both principal and interest components of the payment.

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 amount
\( P \) — Loan principal amount
\( r \) — Annual interest rate (in decimal form)
\( t \) — Loan term in years

Explanation: The formula calculates the fixed monthly payment needed to pay off a mortgage over the specified term, accounting for compound interest.

3. Importance of Mortgage Calculation

Details: Accurate mortgage calculation helps borrowers understand their financial commitments, compare loan options, and plan their budgets effectively for home ownership.

4. Using the Calculator

Tips: Enter the loan principal amount, annual interest rate (as a percentage), and loan term in years. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What is included in the monthly mortgage payment?
A: This calculator shows principal and interest only. Actual payments may include property taxes, homeowners insurance, and PMI if applicable.

Q2: How does interest rate affect monthly payments?
A: Higher interest rates significantly increase monthly payments. Even a 0.5% rate difference can substantially impact your monthly payment amount.

Q3: What is loan amortization?
A: Amortization is the process of paying off a loan through regular payments that cover both principal and interest over the loan term.

Q4: Can I pay off my mortgage early?
A: Yes, but check for prepayment penalties. Making extra payments can significantly reduce total interest paid and shorten the loan term.

Q5: How does loan term affect payments?
A: Shorter terms have higher monthly payments but lower total interest costs. Longer terms have lower monthly payments but higher total interest costs.