Fixed Rate Home Loan Calculator

What is a Fixed Rate Home Loan Calculator?

A Fixed Rate Home Loan Calculator is a financial tool designed to help homebuyers and homeowners estimate their monthly mortgage payments. It takes into account the loan amount, interest rate, and loan term to provide an accurate estimate of how much you'll need to pay each month to fully repay your home loan by the end of its term. This calculator assumes a fixed interest rate, meaning your interest rate and monthly payments remain constant throughout the life of the loan.

The Fixed Rate Home Loan Formula

The formula used to calculate the monthly payment on a fixed rate home loan is:

\[P = L\frac{r(1+r)^n}{(1+r)^n-1}\]

Where:

• \(P\) = Monthly payment
• \(L\) = Loan amount
• \(r\) = Monthly interest rate (annual rate divided by 12)
• \(n\) = Total number of months in the loan term

Step-by-Step Fixed Rate Home Loan Calculation

1. Convert the annual interest rate to a monthly rate: \[r = \frac{\text{Annual Rate}}{12}\]
2. Determine the total number of monthly payments: \[n = \text{Loan Term in Years} \times 12\]
3. Apply the fixed rate home loan formula: \[P = L\frac{r(1+r)^n}{(1+r)^n-1}\]
4. Calculate total repayment: \[\text{Total Repayment} = P \times n\]
5. Calculate total interest: \[\text{Total Interest} = \text{Total Repayment} - L\]

Example Calculation

Let's calculate the monthly payment for a $300,000 fixed rate home loan at 3.5% annual interest for 30 years:

1. \(r = \frac{3.5\%}{12} = 0.2917\%\) per month
2. \(n = 30 \times 12 = 360\) months
3. \(P = 300000 \times \frac{0.002917(1+0.002917)^{360}}{(1+0.002917)^{360}-1} = $1,347.13\)
4. Total Repayment = $1,347.13 × 360 = $484,968.80
5. Total Interest = $484,968.80 - $300,000 = $184,968.80

Visual Representation

This chart illustrates the proportion of principal ($300,000) to total interest ($184,968.80) for the example fixed rate home loan.