1. What is a Mortgage Payment Calculator?

Definition: This calculator determines your monthly mortgage payment and shows how each payment is split between principal and interest over time.

Purpose: It helps homebuyers understand their payment obligations and how much interest they'll pay over the life of the loan.

2. How Does the Calculator Work?

The calculator uses these amortization formulas:

Where:

• \( I_k \) — Interest payment for month k (USD)
• \( P_k \) — Principal payment for month k (USD)
• \( B_k \) — Loan balance after month k (USD)
• \( r \) — Monthly interest rate (decimal)
• \( M \) — Fixed monthly payment (USD)

Explanation: Each payment first covers the interest due, with the remainder reducing the principal. As the principal decreases, less goes to interest and more to principal.

3. Importance of Amortization

Details: Understanding amortization helps borrowers see the true cost of a loan and make informed decisions about refinancing or extra payments.

4. Using the Calculator

Tips: Enter the loan amount, annual interest rate, and loan term in years. The calculator shows your monthly payment and first year's amortization schedule.

5. Frequently Asked Questions (FAQ)

Q1: Why does most of my early payment go to interest?
A: Early in the loan, your balance is highest, so interest charges are largest. This gradually shifts as the principal decreases.

Q2: How can I pay less interest overall?
A: Make extra principal payments, choose a shorter loan term, or refinance at a lower rate when possible.

Q3: What's the difference between APR and interest rate?
A: The APR includes fees and other loan costs, while the interest rate is just the cost of borrowing the principal.

Q4: How does a 15-year compare to a 30-year mortgage?
A: A 15-year loan has higher monthly payments but much less total interest, often saving tens of thousands.

Q5: Can I change my payment frequency?
A: Some lenders allow biweekly payments (26/year), which effectively makes one extra monthly payment annually.