1. What is the Mortgage Amortization Formula?

The mortgage amortization formula calculates the fixed monthly payment required to pay off a loan over a specified term, including both principal and interest components.

2. How Does the Calculator Work?

The calculator uses the standard mortgage payment formula:

Where:

• \( P \) — Principal loan amount ($)
• \( r \) — Monthly interest rate (annual rate ÷ 12)
• \( n \) — Total number of payments (term in years × 12)

Explanation: The formula distributes payments evenly over the loan term, with early payments weighted more toward interest and later payments more toward principal.

3. Importance of Mortgage Calculation

Details: Accurate mortgage calculation helps borrowers understand their financial commitment, compare loan offers, and plan their budget effectively.

4. Using the Calculator

Tips: Enter the principal amount in dollars, 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 payment?
A: This calculation includes principal and interest only. Actual payments may include property taxes, insurance, and PMI if applicable.

Q2: How does interest rate affect payments?
A: Higher interest rates significantly increase monthly payments and total interest paid over the life of the loan.

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

Q4: Can I pay off my mortgage early?
A: Yes, making extra payments reduces principal faster and can shorten the loan term, saving significant interest costs.

Q5: What is the difference between fixed and adjustable rates?
A: Fixed rates remain constant throughout the loan term, while adjustable rates can change periodically based on market conditions.