1. What is the Amortization by Payment Calculator?

This calculator determines the loan principal (amount you can borrow) based on your desired monthly payment amount, interest rate, and loan term. It uses the standard amortization formula to solve for present value.

2. How Does the Calculator Work?

The calculator uses the amortization formula:

Where:

• \( PV \) — Loan principal (present value)
• \( PMT \) — Monthly payment amount
• \( r \) — Monthly interest rate (annual rate ÷ 12)
• \( n \) — Total number of payments (term in months)

Explanation: The formula calculates the maximum loan amount that can be repaid with the given payment amount over the specified term at the given interest rate.

3. Importance of Principal Calculation

Details: Knowing how much you can borrow based on your target payment helps with budgeting and ensures you don't overextend yourself financially.

4. Using the Calculator

Tips: Enter your desired monthly payment in USD, annual interest rate in percent, and loan term in months. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Does this include taxes and insurance?
A: No, this calculates only principal and interest. For a complete mortgage payment, you would need to add property taxes and insurance.

Q2: How does interest rate affect the principal?
A: Higher interest rates reduce the amount you can borrow for a given payment, while lower rates increase borrowing capacity.

Q3: What's the maximum term I can enter?
A: The calculator accepts up to 100 years (1200 months), though most loans have 15-30 year terms.

Q4: Can I use this for car loans or other financing?
A: Yes, this works for any fully amortizing loan where payments are equal throughout the term.

Q5: Why does my actual loan offer differ slightly?
A: Lenders may include fees or use slightly different rounding methods in their calculations.