Using a mortgage calculator can offer several benefits when deciding which type of loan is best. This makes it easier to evaluate whether or not a mortgage has the right combination of long-term financial benefits and affordable monthly payments. Read on to learn more about the benefits of using a mortgage calculator.

Any mortgage calculator will indicate the monthly payment amount on a loan. Some also show the total cost of the loan during its entire term; if not, you can multiply the monthly expense by twelve and multiply that amount by the number of years. The calculator might also have options for bi-weekly or bi-monthly payments. Keep in mind that these calculations will not reflect any interest rate changes, nor the cost of Private Mortgage Insurance (PMI) if it applies. Borrowers who itemize tax deductions should also take into account the deduction for part of their interest payments.

Knowing the overall cost of mortgages benefits borrowers because it becomes easier to understand the long-term impact of a higher or lower monthly payment. For example, a forty year mortgage might cost $70 less per month than an equivalent thirty year loan, but have an overall expense of $80,200 more. The forty year term is preferable for people with lower income levels, while the thirty year option benefits anyone who can afford it in the long-run. Borrowers can also see the effect of slightly different interest rates; a quarter percent higher rate on a $135,000 thirty year loan would cost about $22/month more and $7,850 overall.

The formula to calculate monthly payments is fairly complex; trying to find it with a basic four-function calculator would be very difficult. Some people estimate the monthly payment using a simple formula like “interest x principal / 12″; this often produces an answer that is inaccurate by $100-250 dollars on thirty year mortgages, although it is relatively accurate for a forty year loan. For use when a computer is not present, handheld mortgage calculator units are available for as little as fifteen dollars.

Basically, a mortgage calculator benefits the borrower by better informing him or her of a specific loan’s monthly and overall costs. The borrower can more conveniently compare the short- and long-term benefits of one loan to another, without relying upon an approximate formula. Using such calculators for other types of borrowing is also possible, including auto loans.