1. What is the House Payment Formula?

The house payment formula calculates the fixed monthly payment (PMT) required to fully amortize a loan of amount PV over n periods at an interest rate of r per period. This is the standard formula used for fixed-rate mortgages.

2. How Does the Calculator Work?

The calculator uses the house payment formula:

Where:

• \( PMT \) — Monthly payment (USD)
• \( PV \) — Loan amount or present value (USD)
• \( r \) — Monthly interest rate (decimal)
• \( n \) — Number of payments (months)

Explanation: The formula accounts for both principal and interest payments over the life of the loan, with payments being equal each period.

3. Importance of Monthly Payment Calculation

Details: Calculating the exact monthly payment helps borrowers understand their financial commitment, compare loan options, and budget effectively for home ownership.

4. Using the Calculator

Tips: Enter the loan amount in USD, monthly interest rate as a decimal (e.g., 0.005 for 0.5%), and number of monthly payments. All values must be positive.

5. Frequently Asked Questions (FAQ)

Q1: How do I convert APR to monthly rate?
A: Divide the annual percentage rate (APR) by 12 (months) and convert from percentage to decimal (e.g., 6% APR = 0.06/12 = 0.005 monthly rate).

Q2: Does this include property taxes and insurance?
A: No, this calculates only principal and interest. A complete mortgage payment may include escrow for taxes and insurance.

Q3: What's the difference between PMT and PV?
A: PV is the loan amount you borrow, while PMT is the regular payment you make to pay back the loan.

Q4: How does loan term affect payments?
A: Longer terms (higher n) reduce monthly payments but increase total interest paid over the life of the loan.

Q5: Can this be used for other loans?
A: Yes, this formula works for any fixed-rate, fully amortizing loan (car loans, personal loans, etc.).