Question 1

How is the monthly payment calculated?

Accepted Answer

The monthly payment uses the standard annuity formula: M = P × [r(1+r)ⁿ] / [(1+r)ⁿ − 1], where P is the loan principal, r is the monthly interest rate (annual rate ÷ 12), and n is the total number of months. If the interest rate is zero, the payment equals the principal divided by the number of months.

Question 2

What is an amortization schedule?

Accepted Answer

An amortization schedule is a table that shows each payment in detail — how much goes toward interest and how much reduces the principal balance. Early payments have a higher interest portion; over time the principal portion grows.

Question 3

What are one-time fees and insurance?

Accepted Answer

These are upfront costs you pay when taking out a loan — for example, origination fees, notary fees, mortgage insurance, or property valuation. They are added to the total cost of the loan but do not affect the monthly payment.

Question 4

Why does the interest portion decrease over time?

Accepted Answer

Each month, interest is charged on the outstanding balance. As you repay the principal, the balance falls, so the interest charged is smaller. The monthly payment stays the same, but a larger share of it goes toward the principal each month.

Question 5

Does the calculator account for early repayment?

Accepted Answer

No — the calculator assumes a standard equal-payment (annuity) schedule with no early repayment. If you plan to make extra payments, the total interest you pay will be lower than shown here.

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