Question 1

How do you calculate home loan payments?

Accepted Answer

Home loan payments are calculated using the amortization formula: M = P [ r(1+r)^n ] / [ (1+r)^n - 1 ], where M is monthly payment, P is principal loan amount, r is monthly interest rate, and n is total number of monthly payments.

Question 2

How does loan term affect monthly payment?

Accepted Answer

A longer loan term (e.g. 30 years) decreases your monthly payment but increases the total amount of interest paid over the life of the loan. A shorter term (e.g. 15 years) has higher monthly payments but saves you money on interest.