Mortgage Points Calculator
Calculate if buying mortgage points is worth it and determine your break-even period
Understanding Mortgage Points
Mortgage points, also known as 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 and typically reduces your interest rate by 0.25%. This calculator helps you determine if buying points is financially beneficial based on your specific situation.
When to Buy Points
- You plan to keep the loan for a long time
- You have extra cash available at closing
- The break-even period aligns with your plans
- You want to lower your monthly payments
When to Skip Points
- You plan to sell or refinance soon
- Cash is tight for closing costs
- Interest rates are already low
- You might move before breaking even
Break-even Analysis
The break-even period is the time it takes for the monthly payment savings to exceed the upfront cost of buying points. For example, if points cost $3,000 and save you $50 per month, you'll break even in 60 months (5 years). Consider your expected time in the home when deciding if points are worth it.
Tax Considerations
Mortgage points are typically tax-deductible in the year you pay them if you itemize deductions. However, if you're using the mortgage to buy your main home and the points meet certain requirements, you may be able to deduct them all at once. Consult a tax professional for advice specific to your situation.