Mortgage Points Calculator

- May 11, 2025
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Calculate whether buying mortgage points is worth it based on your loan details and how long you plan to keep the mortgage.

Mortgage points (or discount points) are fees you pay to your lender at closing in exchange for a reduced interest rate.

Loan Information

£

Points Information

1

Advanced Options

About 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. This is also called "buying down the rate," which can lower your monthly mortgage payments.

How Mortgage Points Work
  • Each point costs 1% of your mortgage amount. For example, one point on a £300,000 mortgage would cost £3,000.
  • The rate reduction varies by lender. Typically, one point reduces your interest rate by 0.25%, but this can vary.
  • Points are tax-deductible in the year you pay them if you itemise deductions (for primary residences).
When to Consider Buying Points
  • Long-term homeownership: If you plan to stay in your home beyond the breakeven point, points can save you money.
  • Fixed-rate mortgages: Points generally make more sense with fixed-rate loans than adjustable-rate mortgages.
  • Available cash: You need to have enough cash on hand to cover closing costs plus points.
Calculation Methodology

This calculator determines whether points are worthwhile by:

  1. Calculating your monthly payment with and without points
  2. Determining monthly savings from reduced interest
  3. Computing the breakeven point (when savings exceed the cost of points)
  4. Analysing total savings over your expected time in the home
  5. Considering the time value of money and potential tax benefits

What is a Mortgage Points Calculator?

A Mortgage Points Calculator is a handy tool that helps you figure out if purchasing mortgage points is a good idea for you. Mortgage points, sometimes called discount points, are fees you pay upfront to lower your interest rate. This calculator uses your loan details and how long you plan to stay in your home to show if buying points is worth the cost.

Understanding Mortgage Points

Mortgage points can be a bit confusing, but they can offer significant savings if used wisely. Here’s what you should know about them:

  • Each point costs 1% of your mortgage amount.
  • One point typically lowers your interest rate by 0.25%, though this can vary by lender.
  • Points may be tax-deductible in the year you pay them if you itemise your deductions.

Why Use This Calculator?

Using the Mortgage Points Calculator can help you make informed Financial decisions. By entering details like your loan amount, interest rate, and the number of points you’re considering buying, the calculator gives you a clear picture of potential savings. It helps you know if the upfront cost is justified based on how long you plan to stay in your home.

Key Inputs for Accurate Results

To get the best results from the calculator, you'll need to input specific information. Here are the key details you should have ready:

  • Your loan amount, which is the total you plan to borrow.
  • The interest rate you qualify for before buying points.
  • The duration of your mortgage, such as 30 years or 15 years.
  • How long you expect to live in your home.

How the Calculator Works

The Mortgage Points Calculator works through several steps. It first calculates your monthly payments with and without points, then compares the two. This helps you see how much you save each month and when your savings will cover the upfront cost of the points. It also looks at your total savings over the life of your loan.

When to Consider Buying Points

Buying points might be beneficial in certain situations. You might want to consider it if:

  • You plan to stay in your home long enough for the savings to outweigh the cost of points.
  • You have a fixed-rate mortgage, as points usually work well with these loans.
  • You have enough cash available to cover the costs upfront.

Benefits of Using a Mortgage Points Calculator

This calculator provides a clear analysis of your options. It helps simplify complex calculations and shows you a comparison of different scenarios based on various points and interest rates. With the visual representation of savings over time, you can see if buying points makes sense for your financial future.

Getting Started with the Mortgage Points Calculator

Using the Mortgage Points Calculator is straightforward. Enter your loan details and adjust the options as needed. With just a few clicks, you’ll receive a detailed analysis of your mortgage points situation. This can help ease the decision-making process when it comes to managing your mortgage and finances.