Question 1

How is the monthly mortgage payment calculated?

Accepted Answer

The monthly payment is calculated using the formula: M = P × [r(1+r)^n] / [(1+r)^n - 1], where P is the loan amount, r is the monthly interest rate (annual rate / 12), and n is the total number of payments (years × 12). This is known as the equal installment method (amortized loan).

Question 2

What is an amortization schedule?

Accepted Answer

An amortization schedule is a complete table showing each monthly payment over the life of the loan. Each row breaks down how much of the payment goes toward principal and how much goes toward interest, along with the remaining loan balance after each payment.

Question 3

How can I reduce the total interest on my mortgage?

Accepted Answer

You can reduce total interest by: 1) Making extra payments toward principal, 2) Choosing a shorter loan term (e.g., 15 years instead of 30), 3) Making biweekly payments instead of monthly, 4) Refinancing when interest rates drop, 5) Making a larger down payment to reduce the loan amount.

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