1. What Are Lender Points?

Lender points, also called discount points, are fees paid directly to the lender at closing in exchange for a reduced interest rate. One point equals 1% of the loan amount.

2. How Points Cost is Calculated

The calculator uses the simple formula:

Where:

• Loan Amount — Total amount being borrowed (in USD)
• Points % — Percentage points being paid (1 point = 1%)

Example: For a $300,000 loan with 1.5 points: $300,000 × 0.015 = $4,500 points cost.

3. Importance of Points Calculation

Details: Calculating points cost helps borrowers understand upfront costs versus long-term interest savings. It's essential for comparing loan options and determining break-even points.

4. Using the Calculator

Tips: Enter the total loan amount in USD and the points percentage (e.g., 1.5 for 1.5 points). The calculator will show the dollar cost of the points.

5. Frequently Asked Questions (FAQ)

Q1: Are points tax deductible?
A: Points paid on a mortgage for a primary residence are usually tax deductible in the year paid, but consult a tax professional.

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

Q3: Should I pay points on my mortgage?
A: It depends on how long you plan to keep the loan. Calculate the break-even point to decide.

Q4: Can points be financed into the loan?
A: Sometimes, but this increases your loan amount and total interest paid.

Q5: Are points the same as origination fees?
A: No. Origination fees are separate charges for processing the loan, while points buy down the rate.