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Loan Amount Formula:
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This calculator determines the maximum loan amount you can borrow based on a fixed monthly payment, interest rate, and loan term. It uses the present value of annuity formula to calculate the principal amount.
The calculator uses the loan amount formula:
Where:
Explanation: This formula calculates the present value of a series of equal payments (annuity) at a given interest rate over a specified period.
Details: Calculating the maximum loan amount based on affordable payments helps borrowers determine their borrowing capacity and ensures they don't overextend themselves financially.
Tips: Enter your desired monthly payment in currency, monthly interest rate as a decimal (e.g., 0.005 for 0.5%), and loan term in months. All values must be positive.
Q1: Why use monthly rate instead of annual rate?
A: Since payments are typically made monthly, the calculation requires the monthly interest rate for accurate results.
Q2: How do I convert annual percentage rate to monthly rate?
A: Divide the annual rate by 12 and convert to decimal (e.g., 6% annual = 0.06/12 = 0.005 monthly).
Q3: Does this include taxes and insurance?
A: This calculator only considers principal and interest. For complete budgeting, include property taxes, insurance, and other costs separately.
Q4: What if I want to include a down payment?
A: This calculator determines the loan amount only. The total purchase price would be loan amount plus down payment.
Q5: Are there any fees not included in this calculation?
A: This calculation doesn't include origination fees, closing costs, or other loan-related expenses that may affect the total loan amount.