Mortgage Comparison Tool
Understanding Mortgage Points
Mortgage points, also known as “discount points,” are fees you can pay directly to the lender at closing in exchange for a reduced interest rate. This is also called “buying down the rate.”
Quick Facts About Points:
- One point equals 1% of your mortgage amount ($2,000 on a $200,000 mortgage)
- Generally, each point reduces your interest rate by 0.25%
- Points are tax-deductible in the year you pay them
When Should You Consider Buying Points?
Buying points makes the most sense when:
- You plan to keep the loan for a long time
- You have extra cash available at closing
- You want to lower your monthly payments
- Current interest rates are high
Break-Even Analysis
The break-even point is when the money you've saved in monthly payments equals the amount you paid for points. For example:
- If points cost $4,000 and save you $50 monthly
- Break-even = $4,000 ÷ $50 = 80 months (6.7 years)
Pro Tips:
- Compare multiple scenarios with different point combinations
- Consider how long you plan to keep the mortgage
- Factor in opportunity costs of using the money elsewhere
- Remember that points are negotiable with some lenders
Using This Calculator
This tool helps you compare different loan scenarios and understand the long-term impact of buying points. You can:
- Compare multiple loans side by side
- See the total interest paid over time
- Calculate break-even points for different scenarios
- Visualize the long-term cost differences
Loan 1
Monthly Payment: $1,703.37