Discount Points Calculator

The price of 1 Point equals to 1% of the amount borrowed and it usually buys you 0.25% off the original interest rate, but the whole business makes sense only if you are planning to live in the property longer than the break-even period of the loan. This calculator helps you estimate whether Points will be a wise investment for you.

Input Information
Loan Information
Amount : ($)
Interest Rate : (%)
Interest Rate with Points : (%)
Length : (Yrs)
Additional Information
Points : (%)
Your Savings Rate : (%)
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Financial Analysis (Switch to Plain English)
  Without Points With Points
Amount Financed : $250,000.00 $250,000.00
Monthly Principal & Interests : $1,342.05 $1,266.71
Monthly Payment Savings : $75.34
Points Value : $2,500.00
Monthly Investment Savings : $10.42
True Monthly Savings : $64.92
Break Even : 3 Years 3 Months
Plain English Help (Switch to Financial Analysis)

When applying for a mortgage, you will most likely be presented with the option to pay points to lower your interest rate. In order to determine if this investment is worthwhile in your case, enter the amount of your loan, the interest rate before the purchase of points and the interest rate after the purchase of points, the length of the loan and your savings rate into the appropriate fields of the calculator.

If you are taking out a $250,000.00 loan with an interest rate of 5.000%, you might be able to buy the interest rate down to 4.500% with points. Points applied, a 30-year loan's monthly payments (principal and interest only) will change from $1,342.05 to $1,266.71. You save $75.34.

But, if you choose, for example, to deposit this money in a bank with an average rate of 5.000% rather than purchasing points, you might get $10.42 per month from your investment, thus your true savings will be $64.92 per month.

Considering the price paid for the points, your loan costs will break even after 3 years and 3 months.