1. What is a Loan/Mortgage Calculator?

Definition: This calculator estimates the monthly payment for a loan or mortgage based on principal amount, interest rate, and loan term.

Purpose: It helps borrowers understand their monthly obligations and compare different loan options.

2. How Does the Calculator Work?

The calculator uses the formula:

Where:

• \( M \) — Monthly payment (USD)
• \( P \) — Loan principal (USD)
• \( r \) — Monthly interest rate (annual rate ÷ 12)
• \( n \) — Number of payments (loan term in years × 12)

Explanation: This formula accounts for compound interest and amortizes the loan over its term.

3. Importance of Loan Calculation

Details: Accurate payment calculation helps with budgeting, loan comparison, and financial planning.

4. Using the Calculator

Tips: Enter the loan amount, annual interest rate (as percentage), and loan term in years. All values must be > 0.

5. Frequently Asked Questions (FAQ)

Q1: Does this include taxes and insurance?
A: No, this calculates only principal and interest. Add property taxes and insurance for complete payment estimate.

Q2: How is monthly interest calculated?
A: Annual rate is divided by 12 to get monthly rate (e.g., 6% annual = 0.5% monthly).

Q3: What's the difference between term and amortization?
A: Term is the repayment period; amortization is the schedule showing principal/interest breakdown over time.

Q4: Can I calculate for different payment frequencies?
A: This calculator assumes monthly payments. For bi-weekly, divide annual rate by 26 and adjust term accordingly.

Q5: How accurate is this calculator?
A: It provides standard amortized loan estimates. Actual payments may vary based on lender fees and specific terms.