The Mortgage Loan Calculator

Mortgage Payment Formula:

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

Monthly Payment:

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1. What is a Mortgage Loan Calculator?

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

Purpose: It helps homebuyers and borrowers estimate their monthly mortgage payments and plan their finances accordingly.

2. How Does the Calculator Work?

The calculator uses the formula:

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

Where:

\( M \) — Monthly mortgage 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 calculates the fixed payment needed to fully amortize (pay off) the loan over its term.

3. Importance of Mortgage Calculation

Details: Accurate mortgage calculations help borrowers understand their financial commitments, compare loan options, and budget effectively.

4. Using the Calculator

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

5. Frequently Asked Questions (FAQ)

Q1: Does this include property taxes and insurance?
A: No, this calculates only the principal and interest portion. Your actual payment may include escrow for taxes and insurance.

Q2: What's the difference between APR and interest rate?
A: The interest rate is the cost of borrowing, while APR includes fees and other loan costs.

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

Q4: What if I make extra payments?
A: Extra payments reduce principal faster and can significantly shorten your loan term.

Q5: Are there different types of mortgage calculations?
A: Yes, this is for fixed-rate mortgages. Adjustable-rate mortgages (ARMs) have different calculations.