1. What Are Mortgage Points?

Mortgage points, also known as discount points, are fees paid directly to the lender at closing in exchange for a reduced interest rate. One point costs 1% of your mortgage amount.

2. How Points Calculation Works

The calculator uses the points cost formula:

Where:

• Loan Amount — Total mortgage amount in USD
• Points Percentage — Number of points (each point = 1% of loan amount)

Explanation: The formula calculates the upfront fee you pay to buy down your interest rate.

3. Importance of Points Calculation

Details: Calculating points cost helps borrowers understand the trade-off between upfront costs and long-term interest savings, allowing for better financial decision making.

4. Using the Calculator

Tips: Enter your total loan amount in USD and the number of points you're considering. The calculator will show the total cost of those points.

5. Frequently Asked Questions (FAQ)

Q1: Are mortgage points worth it?
A: It depends on how long you plan to keep the mortgage. Points make sense if you'll stay in the home long enough to recoup the upfront cost through lower monthly payments.

Q2: How much does 1 point lower your interest rate?
A: Typically 0.25%, but this varies by lender and market conditions.

Q3: Can points be financed?
A: Yes, you can roll the cost of points into your mortgage, but this increases your loan amount.

Q4: Are points tax deductible?
A: Points paid on a purchase mortgage are generally deductible in the year paid, while points on a refinance must be amortized over the life of the loan.

Q5: What's the difference between discount points and origination points?
A: Discount points lower your interest rate, while origination points are fees charged by the lender for making the loan.