1. What is the Mortgage Payment Formula?

The mortgage payment formula calculates the Equated Monthly Installment (EMI) for a loan based on principal amount, interest rate, and loan term. It's used to determine monthly payments for refinanced mortgages.

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)
• \( N \) — Loan term in months (years × 12)

Explanation: The formula accounts for both principal and interest components of each payment, with interest being front-loaded in the early years of the loan.

3. Importance of Refinance Calculation

Details: Calculating refinance payments helps determine if refinancing will save money by comparing current payments with potential new payments after accounting for closing costs and new terms.

4. Using the Calculator

Tips: Enter the principal amount in dollars, annual interest rate in percent, and loan term in years. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What's included in the monthly payment?
A: This calculation includes principal and interest only. Your actual payment may include escrow for taxes and insurance.

Q2: How does refinancing save money?
A: Refinancing can save money by securing a lower interest rate, reducing loan term, or switching from adjustable to fixed rates.

Q3: What is the break-even point in refinancing?
A: The break-even point is when monthly savings equal the closing costs of refinancing, typically 2-3 years.

Q4: Are there prepayment penalties?
A: Some loans have prepayment penalties. Check your current mortgage terms before refinancing.

Q5: Should I refinance to a shorter term?
A: Shorter terms have higher payments but save on total interest. Compare both options using this calculator.