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Mortgage Payment Formula:
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The standard mortgage payment formula calculates the fixed monthly payment required to fully amortize a loan over its term. This is the same formula used by Zillow and other mortgage calculators to determine monthly mortgage payments.
The calculator uses the mortgage payment formula:
Where:
Explanation: This formula calculates the fixed monthly payment that pays off the entire loan (principal + interest) over the specified term.
Details: Accurate mortgage payment calculation is crucial for budgeting, comparing loan offers, and understanding the total cost of homeownership. It helps borrowers determine what they can afford and plan their finances accordingly.
Tips: Enter the principal amount in dollars, annual interest rate as a percentage (e.g., 4.5 for 4.5%), and loan term in years. All values must be positive numbers.
Q1: What is included in the monthly payment?
A: This calculation includes principal and interest only. Actual mortgage payments may also include property taxes, homeowners insurance, and PMI if applicable.
Q2: How does interest rate affect the payment?
A: Higher interest rates significantly increase monthly payments. Even a 0.5% difference can add hundreds of dollars to your monthly payment over the loan term.
Q3: What's the difference between 15-year and 30-year mortgages?
A: 15-year mortgages have higher monthly payments but much less total interest paid. 30-year mortgages have lower monthly payments but significantly more interest paid over time.
Q4: Can I calculate payments for different loan types?
A: This formula works for fixed-rate mortgages. Adjustable-rate mortgages (ARMs) require more complex calculations that factor in rate changes.
Q5: How accurate is this calculator?
A: This uses the standard mortgage formula employed by lenders and real estate platforms like Zillow. Results should match what you'd get from professional mortgage calculators.