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Discount points calculator: should you buy the rate down?
Compare a no-points quote to a quote with points. See how long it takes to break even, and whether you'll keep the loan long enough.
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What are discount points?
Discount points are an upfront fee you pay at closing to lower your interest rate. One point equals 1% of the loan amount. They show up in Section A of your Loan Estimate as a percentage and a dollar amount. Points only make sense if you keep the loan long enough for the lower payment to repay the cost.
How do I know if points are worth it?
Divide the cost of the points by the monthly payment savings to get your break-even in months. If you expect to keep the loan well past that point, without selling or refinancing, points can save money. If rates might drop and you'd refinance, paying points may not pay off.
Read: Rate vs. points: the break-even math.
Points you didn't ask for
Some Loan Estimates include points by default to make the rate look lower. If you see points in Section A, ask what the rate would be with zero points, and compare both. It's one of the most common things I find when I review Loan Estimates.
For illustration only. Not a commitment to lend, a Loan Estimate, or an offer of credit. Your actual figures depend on your full application, credit approval, property, and the loan program. John Stafford NMLS #2470539 | GoRascalJohn powered by GoRascal Inc. NMLS #2072896. Equal Housing Opportunity.
Common questions
Where are points on my Loan Estimate?
Page 2, Section A, Origination Charges, listed as a percentage of the loan amount and a dollar figure.
Are lender credits the opposite of points?
Basically yes. A lender credit lowers your closing costs in exchange for a higher rate. It appears in Section J.
Are points tax-deductible?
Sometimes. Ask a tax professional about your situation.
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