Mortgage Points Calculator
Calculate mortgage discount points to lower your interest rate. Determine if buying points saves you money based on your loan amount, interest rate, and loan term.
Step 1: Loan Details
Mortgage Points Formula
1 Point = 1% of Loan Amount
Each point typically reduces interest rate by 0.25%
Break-even period = Points Cost / Monthly Savings
Step 2: Points & Options
Points Guidelines
• 0-1 points: Conservative approach
• 1-2 points: Common for long-term owners
• 2-3 points: Aggressive rate reduction
• 3+ points: Only for very long-term ownership
Consider break-even period before buying points
Mortgage Points Analysis
Monthly Payment Savings
Points Comparison Table
| Points | Cost | New Rate | Monthly Payment | Monthly Savings | Break-even |
|---|
Mortgage Points Formula
Points Cost = Loan Amount × Points × 0.01
Where:
• Points = Number of discount points (1 point = 1% of loan)
• New Interest Rate = Original Rate – (Points × Rate Reduction per Point)
• Monthly Savings = Payment(Original Rate) – Payment(New Rate)
• Break-even Period (months) = Points Cost ÷ Monthly Savings
Mortgage Payment Formula:
M = P × [r(1+r)^n] ÷ [(1+r)^n – 1]
Where P=Loan Amount, r=Monthly Rate, n=Total Payments
Example Calculation
Example: $300,000 Loan with 1 Point
Loan Amount: $300,000
Original Rate: 4.5%
Points: 1 (Cost: $3,000)
Rate Reduction: 0.25% per point
New Rate: 4.25%
Monthly Payment (Original): $1,520
Monthly Payment (With Points): $1,475
Monthly Savings: $45
Break-even: $3,000 ÷ $45 = 66.7 months (5.6 years)
Total Savings (30 years): $45 × 360 = $16,200
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