1. What Are Mortgage Points?

Mortgage points (also called 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 this simple formula:

Where:

• \( Loan\ Amount \) — Total mortgage amount in USD
• \( Points\ \% \) — Percentage points being purchased (1 point = 1%)

Example: For a $300,000 loan buying 2 points: $300,000 × 0.02 = $6,000 cost

3. Benefits of Buying Points

Details: Buying points lowers your interest rate, which can save money over the life of the loan. Each point typically reduces your rate by 0.25%.

4. Using the Calculator

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

5. Frequently Asked Questions (FAQ)

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

Q2: How many points can I buy?
A: Typically 0-4 points, though some lenders allow more. There may be tax-deductible limits.

Q3: Do points affect my down payment?
A: No, points are separate from your down payment and are paid at closing.

Q4: Can points be financed?
A: Yes, you can roll points into your loan amount, but this increases your total borrowing.

Q5: Are points the same as origination fees?
A: No. Origination fees are lender charges for processing the loan, while points are optional for rate reduction.