1. What is Mortgage Payment with Points?

Mortgage points are fees paid to the lender at closing in exchange for a reduced interest rate. Each point typically costs 1% of the loan amount and lowers the rate by about 0.25%. This calculator helps determine your monthly payment after accounting for points.

2. How Does the Calculator Work?

The calculator uses the standard mortgage payment formula adjusted for points:

Where:

• \( PMT \) — Monthly payment
• \( PV \) — Original loan amount
• Points Cost — \( PV \times (\text{Points Percentage}/100) \)
• \( r \) — Monthly interest rate (annual rate ÷ 12)
• \( n \) — Total number of payments (term in years × 12)

Explanation: The formula accounts for the reduced loan amount after paying points and calculates the monthly payment based on the remaining principal.

3. Importance of Points Calculation

Details: Understanding how points affect your payment helps determine if paying points makes financial sense for your situation. Points can save money over the long term but increase upfront costs.

4. Using the Calculator

Tips: Enter the loan amount, points percentage (typically 0-3%), interest rate, and loan term. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What are mortgage points?
A: Points are prepaid interest - each point equals 1% of your loan amount and typically reduces your interest rate by 0.25%.

Q2: Should I pay points on my mortgage?
A: It depends on how long you plan to keep the loan. The longer you stay in the home, the more you benefit from the lower rate.

Q3: How do points affect my monthly payment?
A: Points reduce your monthly payment by lowering your interest rate, but increase your upfront closing costs.

Q4: Are points tax deductible?
A: In many cases, yes. Points paid on a primary residence purchase mortgage are usually deductible in the year paid.

Q5: What's the break-even point for paying points?
A: Divide the cost of points by the monthly savings to determine how many months it takes to recoup the cost.