Mortgage Calculator: Paying Discount Points

Should I pay points on a mortgage to lower the rate?

“Paying points”—or leveraging mortgage discount points—can sometimes help you lower your mortgage interest rate. Deciding whether paying points is a good option for you depends on how long you plan to stay in your home: the longer the mortgage, the more beneficial paying points upfront may be.

Information and interactive calculators are made available to you as self-help tools for your independent use and are not intended as a solicitation for any credit product or to provide credit advice. Calculators and input options are intended solely for general information and educational purposes. Calculations are hypothetical, and based on information and assumptions provided by you. We cannot and do not guarantee their applicability or accuracy in regards to your individual circumstances. You should not take any action on the basis of the information provided through this calculator. We encourage you to seek personalized advice from qualified professionals regarding all personal finance issues.

How mortgage points work

The more points on a mortgage you pay, the lower your rate will be. With each point costing 1 percent of the mortgage amount, the big questions are: How much you can afford to pay up front? And is that effort worth the long-term savings?

To help simplify this decision, consider how long you plan to stay in your home. The longer you plan on having your mortgage, the more advantageous paying for points up front may be. This is due to the longer time spent with a lower interest rate. If you plan on being in your home for a shorter time, paying the upfront expense of mortgage points might not be beneficial as it would not allow you enough time to make up the cost with interest savings.

How to use this calculator

Is paying for discount points the right choice for you? Let’s find out by comparing the cost of paying for more or less points.

Shared loan info:

Enter details for a single mortgage loan: fixed-rate OR adjustable-rate. Select the purchase price, down payment, term, and expected years in home.

Less points:

First, select your interest rate and the lowest discount point percentage you are considering. If you may forgo discount points, enter “0.000%” to get a comparison of your payment with or without discount points.

More points:

Next, select your interest rate and the highest discount point percentage you are considering.

Fees & taxes:

The origination charge is generally between 0.5% and 1% of your mortgage loan, but check with your mortgage specialist to confirm. For Other Settlement Services, consider the cost of an appraisal, credit report, flood certification, tax service, lender and owner’s title insurance, and government recording fees.

To find property taxes, check MLS listings online, or contact your county’s assessor/recorder’s office or a local real estate agent. Calculate homeowner’s insurance here, or contact an insurance agent for a quote.