Mortgage Points Calculator

How to Calculate Your Mortgage Payment With This Calculator

To calculate how buying points will impact your interest rate and mortgage payment, input this information into the calculator:

1. Loan amount: Subtract your down payment from the home price to estimate how much you'll need to borrow.
2. Loan term: Use the dropdown to select a repayment term of 10, 15, 20, 25 or 30 years.
3. Interest rate: A preapproval letter from a mortgage lender will include the interest rate they believe you can qualify for. If you don't have a preapproval letter, check current mortgage interest rates for an estimate. Be sure to enter the interest rate, not the annual percentage rate (APR).
4. Number of points you're considering purchasing: Use the dropdown to select 0 points and calculate your mortgage costs without buying points. Then use the dropdown to choose 1, 2, 3, 4 or 5 points and compare how purchasing points would affect your costs.

Understanding Your Results

When you click the Calculate button, you'll see this information:

• The upfront point cost is the cost of purchasing the selected number of points. Each point typically costs 1% of your loan amount.
• The break-even period reflects how long it will take for your monthly savings to equal the upfront cost of buying points.
• The monthly payment is your monthly mortgage payment.
• The total paid is the amount of principal and interest you'll have paid when your mortgage is paid off.
• The total interest paid breaks out the total interest you'll have paid when your mortgage is paid off.
• The total interest saved shows how much purchasing the selected number of points will save you in interest over the life of your mortgage. Each point reduces your interest rate by 0.25%.

Learn more: Factors That Help Determine Your Mortgage Interest Rate

Compare mortgage rates

Check today’s rates to find the best loan offers. Staying updated on current rates helps you secure a competitive mortgage and save more over time.

What to Consider Before Buying Mortgage Points

Take the following factors into account when deciding whether to buy mortgage points.

• How will points affect your interest rate and monthly payment? Even a small reduction in your mortgage interest rate can save you thousands over the loan term, especially if you have a large loan.
• How much do points cost? Buying points is typically part of your closing costs and can add significantly to the upfront costs of buying a home. Rolling the cost of points into your mortgage keeps closing costs down, but ultimately costs more because you'll pay interest on the amount.
• How soon do you expect to move or refinance? If you plan to move or refinance your mortgage before the break-even point, you won't recoup the cost of points.
• Will paying for points leave you short of cash? Buying points could leave you without funds to fix up your new home, cover moving costs or handle financial emergencies.
• What's your debt-to-income ratio (DTI)? If the projected mortgage payment pushes your DTI out of the lender's comfort zone, buying points could bring it down.
• Are there better ways to use the money? For instance, your return from investing the money could exceed the potential savings from buying points.
• Will the seller pay for points? In a buyer's market or with a motivated seller, you can sometimes negotiate to have the seller cover the cost of points.
• Are there other ways to reduce your interest rate? Making a bigger down payment, choosing a shorter loan term, opting for a different type of mortgage or improving your credit score could all help you qualify for a lower mortgage interest rate.

Tip: If you itemize deductions, you may be able to deduct the cost of mortgage points on your income taxes.

Learn more: Are Mortgage Points Worth It?

Factors That Affect Your Mortgage Payment

The four key factors that impact what your mortgage payment will be are principal, interest, taxes and insurance, often referred to as PITI. A couple additional factors may affect your payment as well.

• Principal: The amount you borrow to purchase a home. Part of each monthly mortgage payment goes to paying down principal. Early on in your loan, less of your monthly payment goes to paying principal than to interest; eventually, more of your monthly payments will go toward principal.
• Interest: Part of each monthly mortgage payment goes toward paying interest. Your loan's interest rate and whether you have a fixed-rate or adjustable-rate mortgage will affect your payments. Fixed-rate mortgages have the same interest rate throughout the term. Adjustable-rate mortgages (ARMs) have a fixed rate for an initial period, after which interest rates may go up or down based on your loan's terms.
• Taxes: Many mortgage lenders include a prorated amount for property taxes in your monthly mortgage payment. Lenders hold the funds in an escrow account that they use to pay your property taxes when they're due.
• Homeowners insurance: Mortgage lenders require borrowers to have homeowners insurance to protect their investment. As with taxes, lenders often use escrow accounts to ensure these premiums are paid.
• Mortgage points: Buying points reduces your mortgage interest rate, lowering your monthly mortgage payment.
• Private mortgage insurance (PMI): Mortgage insurance protects the lender if you fail to repay your loan. PMI is usually required on loans for more than 80% of the home's value; the cost is generally included in your mortgage payment.

If you use an escrow account, your mortgage payments can change as your taxes and insurance premiums change, even if you have a fixed-rate loan.

Learn more: What Is Principal, Interest, Taxes and Insurance (PITI)?

How to Buy Mortgage Points

You can buy mortgage points when you get a mortgage or refinance an existing mortgage. Some lenders will offer or advertise mortgage discount points; in other cases, you'll need to ask about them. Your loan officer or broker can help you buy points.

When comparing mortgage offers, you should receive a loan estimate document from each lender. You'll find mortgage points listed as a separate line item on the top left of the second page of your loan estimate document. To be sure you're comparing apples to apples, ask for loan offers with the same number of points.

You usually pay for points as part of your closing costs, but you may have the option to roll the cost into your loan amount. Just keep in mind that doing so means paying more for points, since the amount added to your loan will accrue interest.

Learn more: How to Buy a House

The Bottom Line

Buying discount points is one way to reduce your mortgage interest rate, but there are other options too. For instance, having good credit could help you qualify for a better mortgage rate.

As you prepare to shop for a mortgage, start by checking your credit report and FICO^® Score^Θ for free from Experian. You'll be able to see what factors have the biggest impact on your score and steps you can take to improve it. You can also sign up for free credit monitoring from Experian to keep tabs on your progress and get alerts of important changes to your credit that could affect your ability to get a mortgage.