Mortgage Points Calculator - Calculate Discount Points Savings
Free mortgage points calculator to determine if buying discount points is worth it. Calculate break-even period, monthly savings, and total cost benefits
Mortgage Points Calculator
Points Analysis
What is a Mortgage Points Calculator?
A mortgage points calculator is a free financial tool that helps you determine whether buying discount points on your mortgage is financially beneficial. It calculates the break-even period, monthly savings, and total cost impact of purchasing mortgage points.
This calculator helps with:
- Points analysis - Calculate the true cost of buying discount points
- Break-even calculation - Determine how long until points pay for themselves
- Savings comparison - Compare payments with and without points
- Decision making - Make informed choices about mortgage points
- Long-term planning - Understand total savings over loan life
Mortgage Points Components
Understanding mortgage points involves several key components:
Discount Points
Optional fees paid upfront to reduce interest rate. Each point typically costs 1% of loan amount.
Origination Points
Fees charged by lender for processing the loan. Do not reduce interest rate.
Break-even Period
Time required for monthly savings to equal upfront cost of points.
Rate Reduction
How much each point lowers your interest rate (typically 0.25%).
Types of Mortgage Points
Discount Points
Prepaid interest that permanently reduces your interest rate. Best for long-term homeowners.
Origination Points
Lender fees for processing your loan. Required fees that don't reduce your rate.
Negative Points
Lender credits that effectively reduce closing costs. May increase your interest rate slightly.
How to Use This Mortgage Points Calculator
Enter Loan Details
Input home price, down payment, and base interest rate (e.g., $300,000, $60,000, 4.5%)
Specify Points
Enter number of points, cost per point, and rate reduction (e.g., 2 points, 1.0%, 0.25%)
Add Loan Terms
Enter loan term, property tax, and home insurance amounts
Review Results
Analyze cost of points, monthly savings, and break-even period
Benefits of Using Mortgage Points Calculator
- •Break-even Analysis: Determine exactly when points pay for themselves and start saving money.
- •Cost Transparency: Understand the true upfront and long-term costs of buying points.
- •Decision Support: Make informed choices based on your expected time in the home.
- •Savings Projection: See total savings over the life of your loan.
- •Comparison Tool: Compare different point scenarios side by side.
Factors That Affect Your Points Decision
1. How Long You'll Own the Home
Points are better for long-term homeowners. If you'll move in 3 years, points may not be worth it.
2. Your Cash Flow Situation
Points require upfront cash. Consider if you can afford the payment without depleting emergency savings.
3. Interest Rate Environment
Points are more valuable in high interest rate environments where savings are greater.
4. Tax Considerations
Points are tax-deductible and add to your home's cost basis, reducing capital gains tax.
Frequently Asked Questions
Common questions about mortgage points and discount points analysis
What are mortgage discount points?
Mortgage discount points are fees paid upfront to lower your interest rate. Each point typically costs 1% of your loan amount and reduces your interest rate by 0.25%. They're also called discount points or origination points.
Are mortgage points worth it?
It depends on how long you plan to stay in your home. If you'll keep the mortgage longer than the break-even period (typically 4-7 years), points usually save you money. Use this calculator to determine your specific break-even point.
How much do mortgage points cost?
Each mortgage point typically costs 1% of your loan amount. For a $300,000 loan, one point costs $3,000. Two points would cost $6,000, and so on. The cost varies by lender and loan type.
How much does each point lower my interest rate?
Typically, each mortgage point reduces your interest rate by 0.25%. However, this can vary by lender and market conditions. Some lenders offer 0.20% or 0.30% reduction per point.
What's the break-even period for mortgage points?
The break-even period is how long it takes for the monthly savings from a lower interest rate to equal the upfront cost of buying points. For example, if points cost $6,000 and save you $100/month, your break-even period is 60 months (5 years).
Do mortgage points affect my taxes?
Yes, mortgage points are tax-deductible in the year you pay them, but they're added to your home's cost basis. This reduces your capital gains tax when you sell. Consult a tax professional for your specific situation.
Can I negotiate mortgage points?
Yes, mortgage points are often negotiable. You can ask your lender to reduce the number of points required or negotiate a better rate reduction per point. Shopping multiple lenders can save you thousands.
What's the difference between discount points and origination points?
Discount points are optional fees that lower your interest rate. Origination points are fees charged by the lender for processing your loan. Both are tax-deductible, but only discount points reduce your interest rate.