# Mortgage Discount Points Calculator

### What Do Points Mean on a Mortgage?

Mortgage discount points are basically extra fees paid at closing in exchange for a lower interest rate over the life of the mortgage. If you’ve ever applied for a mortgage, you’ve probably heard the term “discount points”, but you may not be familiar with what they are. Mortgage Discount Points are basically extra fees paid at closing in exchange for a lower interest rate over the life of the mortgage.

### Mortgage Points Refinancing

If you do end up opting to pay discount points, you can typically roll them into the new loan amount if you’re refinancing. If you’re purchasing a home, the Mortgage Discount Points will have to be paid out of pocket as part of the closing costs and down payment.

Mortgage Discount Points Calculator
 Currency \$ £ ₱ ¥ R € Total Mortgage Amount Interest Rate: No Points % Term Months Interest Rate: With Points % Discount Points Number
 Costs for points Annuity: No Points Month Total Payments Total Interest Paid
 Annuity: With Points Month Total Payments Total Interest Paid
 Your savings per month Month Recover Points (Number of months) Months The saving in entire period (Reduced to pay for points)

One Mortgage Discount Point (or simply “point”) equals 1% of the loan amount. For example, if the loan amount is \$200,000, one point would be \$2,000 – 1% of the loan amount. How much of a rate discount a point buys you can vary widely, but it’s often in the range of 0.125% to 0.375%.

### What Are Points on a Mortgage

People asked: Question: Without buying points, a monthly mortgage payment will be \$958. buying 1 point at closing would reduce the payment to \$948.75. if each point costs \$1000.00, rounded to the nearest year, how long would it take to break even by buying 1 point?
Answer: Buying 1 point will save you \$ 9.25 each month. You will save \$ 1,008.25 in 109 months.

People asked: Question: Todd Foley is applying for a \$100,000 mortgage. he can select either a \$595 monthly payment with no points or a \$515 payment with two points. how many months will it take todd to cover the cost of the discount points if he takes the lower monthly payment?
Answer: The usual price for one point is 1% of the loan amount. For two points, \$ 2,000 had to be paid. Due to the lower annuity, the monthly savings were \$ 80. In 25 months, the savings were \$ 2,000.

People asked: Question: Without buying points, a monthly mortgage payment will be \$958. buying 1 point at closing would reduce the payment to \$948.75. if each point costs \$1000.00, rounded to the nearest year, how long would it take to break even by buying 1 point? a. 7 years b. 8 years c. 9 years d. 10 years
Answer: 109 months, or 9.08 years.

People asked: Question: At closing, the buyer paid discount points totaling \$6,187.50 on a loan of \$225,000. how many points did the buyer pay?
Answer: The usual price per item is 1% of the loan amount. The buyer paid 2.75% of the loan for points. So he bought 2.75 points.

People asked: Question: Penny is borrowing \$274,000 to purchase a property valued at \$350,000. you have quoted her a 7.5% interest rate. she is willing to pay one discount point for a 6.75% interest rate. how much additional money will she need at closing to cover the point?
Answer: The usual price for one point is 1% of the loan amount. She will need \$ 2740.

People asked: Question: How much does one discount point cost on a \$150,000 mortgage for a \$200,000 home?
Answer: The usual price for one point is 1% of the loan amount. For a \$ 150,000 loan, you need to pay \$ 1,500 for one point.

People asked: Question: Without buying points, a monthly mortgage payment will be \$1,250. buying 1 point at closing would reduce the payment to \$1,236. to the nearest year, how long would it take to break even by buying 1 point, with a \$100,000 mortgage?
Answer: The monthly savings are \$ 14. One discount point is usually 1% of the loan amount, which is \$ 1000. Profitability will be achieved in 71.43 months.

People asked: Question: What does a discount point mortgage calculator do?

People asked: Question: What are points on a mortgage?
Answer: Points on a mortgage are upfront fees paid by the borrower to the lender at the time of closing, in order to lower the interest rate on the mortgage. Each point typically costs 1% of the total loan amount. When a borrower pays points, they are essentially prepaying interest on the loan, which allows the lender to offer a lower interest rate on the mortgage. This can result in lower monthly mortgage payments and can save the borrower money over the life of the loan. It's important to note that paying points may not always be the best financial decision for a borrower, as it depends on factors such as the length of time the borrower plans to stay in the home and their overall financial goals. It's recommended to consult with a financial advisor or mortgage professional to determine if paying points is the right choice for your individual situation.

People asked: Question: What do points mean on a mortgage?
Answer: Points on a mortgage refer to an upfront fee paid by the borrower to the lender at the time of closing in exchange for a lower interest rate on the loan. One point is equal to one percent of the loan amount. For example, if a borrower is taking out a \$200,000 mortgage and decides to pay one point, they would pay \$2,000 upfront to the lender. In exchange, the lender might lower the interest rate on the loan by, say, 0.25%, resulting in a lower monthly payment. Points can be a way for borrowers to reduce their monthly mortgage payments over the life of the loan. However, it's important to consider how long it will take for the monthly savings to offset the upfront cost of paying points, and whether it makes sense for your specific financial situation.

People asked: Question: How to calculate discount points?
Answer: Discount points are a form of prepaid interest that borrowers can use to lower their mortgage interest rate. Each discount point is equal to 1% of the total loan amount, and typically, paying one point can lower the interest rate by 0.25%. To calculate the cost of discount points, you need to follow these steps:
1. Determine the total loan amount: This is the amount you are borrowing to purchase the property.
2. Determine the number of points you want to buy: Each discount point is equal to 1% of the loan amount. For example, if your loan amount is \$300,000 and you want to buy one point, you would pay \$3,000.
3. Calculate the cost of each point: To calculate the cost of each point, divide the total loan amount by 100. For example, if the loan amount is \$300,000, each point would cost \$3,000.
4. Calculate the interest rate reduction: Each point typically lowers the interest rate by 0.25%. To calculate the interest rate reduction, multiply the number of points by 0.25%. For example, if you buy one point, your interest rate would be reduced by 0.25%.
5. Calculate the total cost of discount points: To calculate the total cost of discount points, multiply the cost of each point by the number of points you want to buy. For example, if each point costs \$3,000 and you want to buy one point, the total cost would be \$3,000.

6. It's important to consider whether buying discount points is worth it for your specific situation. The cost of the points can be significant upfront, and you'll need to calculate how long it will take to recoup the cost through the lower interest rate. If you plan to stay in the home for a long time, buying points can be a smart financial decision.

### When Should I Pay Them?

Does it make sense to pay mortgage points? Well, that depends on your goals for the loan. If you’re planning on keeping the loan at least 5 to 7 years, it can sometimes make sense to pay extra points for a lower rate. However, if you know you won’t be in the loan that long, it’s usually better to keep your costs lower and avoid paying points. If you pay one or two points to get a lower rate and only keep the loan a few years, you’ll likely end up paying more for the mortgage than you need to.

To see how points impact the lifetime cost of a loan, check out the three 30-year fixed loan scenarios in the table below. The option on the left offers zero points but has the highest interest rate. The option in the middle has a slightly lower rate with one point, and the option on the right has two points and the lowest interest rate.

### Those savings are accumulated over a 30-year period.

As you can see, the lowest rate option with two points has the lowest lifetime costs, but keep in mind those savings are accumulated over a 30-year period. Over 30 years, it’s only cheaper than the one point option by \$3834 – or \$127/year. And those savings are only realized in the later years of the loan because it takes time for the lower interest rate to make up for the added upfront cost of the points. If you run both options through an amortization calculator, you’ll discover that it takes until well past the 10-year mark for the two-point option to become cheaper than the one point option.

### As you can see, paying discount points can make sense

, but you need to stay on the loan for a while to reap the benefit. If you plan to only stay in the loan for around 5 to 7 years or less, it’s usually best to avoid points (if possible) and keep your costs lower. If you know you’ll be on the loan for at least 5 to 7 years, it can make sense to pay points, but don’t overdo it. As you can see from our brief analysis here, the lowest rate on the rate sheet isn’t always the best deal if you end up paying a lot of costs to get it and don’t keep the loan long enough.