How this number is made
This reverses the installment formula. You name the payment, the rate, and the months, and the page returns the principal that payment will support. It is not a mortgage, because taxes and insurance are not carved out of the payment. The home-price page does that.
- The payment is principal and interest only.
- A zero rate means the principal is the payment times the months.
Formula
Principal = payment × (1 − (1+r)^(−n)) ÷ r, with r = APR ÷ 12.
Worked example
With the figures already in the form, amount the payment supports is $21,678.
Questions
Why is this smaller than the price I saw?
Fees, tax, and a down payment sit outside this principal. The amount is what the payment amortizes.
Does a lower rate raise the principal?
Yes. The same payment covers a larger balance when less of it is interest.