1. What is a Mortgage Basis Point Calculator?

The Mortgage Basis Point Calculator helps determine how changes in interest rates (measured in basis points) affect the cost of a mortgage loan. One basis point equals 0.01% (1/100th of a percent).

2. How Does the Calculator Work?

The calculator uses the following formula:

Where:

• \( \text{Loan Amount} \) — Total mortgage amount in USD
• \( \text{BP} \) — Basis points (1 BP = 0.01%)
• \( \text{Cost Change} \) — Dollar amount impact

Explanation: The formula converts basis points to a decimal (dividing by 10,000) and multiplies by the loan amount to find the dollar impact.

3. Importance of Basis Point Calculations

Details: Understanding basis point impacts helps borrowers evaluate different mortgage offers, compare rate changes, and make informed financial decisions.

4. Using the Calculator

Tips: Enter the loan amount in USD and the basis point change. The calculator will show the dollar amount impact of the rate change.

5. Frequently Asked Questions (FAQ)

Q1: What exactly is a basis point?
A: A basis point is 1/100th of a percent (0.01%). 100 basis points = 1%.

Q2: How does this relate to mortgage rates?
A: When mortgage rates change by 25 basis points, that's 0.25% which can significantly impact your monthly payment.

Q3: Is this calculator for monthly or annual costs?
A: This shows the annual cost impact. Divide by 12 for approximate monthly impact.

Q4: Does this account for compounding?
A: No, this is a simple calculation. Actual mortgage impacts may vary slightly due to compounding.

Q5: How accurate is this for adjustable-rate mortgages?
A: It gives a good estimate for any rate change, but ARM impacts depend on remaining term and adjustment frequency.