Mortgage Loan Calculator Bankrate

Monthly Payment Formula:

\[ M = P \times \frac{r(1 + r)^n}{(1 + r)^n - 1} \]

Monthly Payment (M):

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1. What is a Mortgage Loan Calculator?

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

Purpose: It helps homebuyers and borrowers understand their potential monthly mortgage payments before committing to a loan.

2. How Does the Calculator Work?

The calculator uses the standard mortgage formula:

\[ M = P \times \frac{r(1 + r)^n}{(1 + r)^n - 1} \]

Where:

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

Explanation: The formula accounts for both principal and interest payments over the life of the loan.

3. Importance of Mortgage Calculation

Details: Accurate payment estimation helps with budgeting, loan comparison, and determining affordable home prices.

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 property taxes and insurance?
A: No, this calculates only principal and interest. Your actual payment may include escrow for taxes and insurance.

Q2: What's the difference between interest rate and APR?
A: APR includes both interest rate and loan fees, giving a more complete cost picture.

Q3: How does loan term affect payments?
A: Shorter terms mean higher monthly payments but less total interest paid over the loan life.

Q4: What is amortization?
A: The process of paying off a loan through regular payments that cover both principal and interest.

Q5: Can I use this for other types of loans?
A: Yes, it works for any fixed-rate installment loan (car, personal, etc.), though terms may vary.