Mortgage Points Calculator
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When applying for a mortgage, you can purchase "discount" mortgage points upfront to buy down the interest rate and lower the monthly payment. Input a few factors in our mortgage points calculator to decide whether to buy points.
For tips on using the mortgage points calculator,
Buy down the interest rate: Is it worth it?
Mortgage points, also known as discount points, are optional fees paid upfront at closing to lower the interest rate and monthly payment. The cost of one point is 1% of the loan amount, and the lender typically cuts the interest rate by up to 0.25%.
The mortgage points calculator determines the break-even point when the monthly savings from purchasing points equals the cost of buying them.
For example:
On a $300,000 loan with a 7% interest rate, purchasing one point brings the mortgage rate to 6.755%, dropping the monthly payment from $1,996 to $1,946 — a monthly savings of $50. The cost: $3,000. The calculator divides the cost by the monthly savings amount to find the break-even point.
$3,000/$50 = 60 months (5 years)
If you keep the mortgage past the break-even point, buying points could pay off. But there are other factors to consider. Perhaps you'd rather use the money for other purposes, like making a larger down payment, paying for home repairs or investing.
Meanwhile, in a buyer's market, the seller may offer to pay for some or all of your mortgage points. Talk to your real estate agent to find out if this might be possible.
Buying points could be helpful if:
You have enough cash to make your desired down payment and still have some left for lowering the rate.
You expect to keep the loan long enough that you’ll exceed the break-even point (meaning you won't move or refinance within a given time frame).
You want to reduce the size of your monthly mortgage payment.
Buying points might not be worth it if:
You plan to sell the home or refinance before you’ve hit the break-even point.
You need the cash you’d use to buy points for something else.
The monthly savings are so small that it doesn’t make a meaningful dent in your budget (even if you reach the break-even point).
The cost of mortgage points is in addition to paying closing costs, which generally are between 2% and 6% of the mortgage amount. On a $300,000 loan, closing costs without the addition of discount points would be $6,000 to $18,000.
Using the mortgage points calculator
How this calculator works
To use the mortgage points calculator, type your information into these fields:
Desired loan amount.
Loan term (years).
Interest rate without points (shown as a percent). Not sure? Take a look at current interest rates to get an estimate.
Number of points. (This is required to deliver your results).
Interest rate with points. This shows what your rate would be if you paid for that number of points. The mortgage points calculator assumes that your interest rate will drop by a quarter of a percentage point for each point purchased. But maybe a lender has shown you a different rate with this number of points. If so, edit this field to ensure the accuracy of your results.
A Loan Estimate — a standard form the lender must provide within three business days of receiving your application — shows how much your loan costs, including mortgage points. The Loan Estimate is especially handy for comparing offers from different lenders, though it's important to remember that the actual costs can change. You'll get a final document called the Closing Disclosure with the actual costs within three business days of the scheduled loan closing.
Understanding your results
Break-even period (years). This shows how many years it will take before you’ve paid off the points you purchased and when you’ll start saving money from the lower interest rate.
Break-even period (months). This is the same as in the previous result, shown in a different way: The number of months before your break-even point.
Payment required to buy points. Your cost to buy the number of points entered above. One point usually costs 1% of the total amount you're borrowing, so on a $300,000 mortgage, one point would be $3,000.
Monthly savings with points. Once you pay off the cost of the points, this is how much you'll save each month.
Monthly mortgage payment with points. Your new, lower monthly mortgage payment after purchasing points.
Monthly mortgage payment without points. This is your monthly payment if you don’t buy points. Use this result to compare the payments with and without points to see how buying points lowers your monthly payment. To see how much you'd save in interest over the life of the loan, use our amortization calculator.
On a similar note...
How much house can you afford?
Understanding how much you can afford is a great first step to buying a home. NerdWallet helps you easily determine your home buying budget with our home affordability calculator.
