Mortgage Calculator With Points Comparison

Mortgage Payment Comparison:

\[ Monthly Payment = \frac{P \times r(1+r)^n}{(1+r)^n - 1} \]

Loan Amount:

Interest Rate:

Loan Term:

years

Points Option:

Points Rate:

Monthly Payment:

Points Cost:

Total Payment:

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1. What Is Mortgage Points Comparison?

Mortgage points comparison helps borrowers decide whether to pay upfront points to secure a lower interest rate on their mortgage. This calculator compares the costs and benefits of paying points versus not paying points.

2. How Does The Calculator Work?

The calculator uses the standard mortgage payment formula:

\[ Monthly Payment = \frac{P \times r(1+r)^n}{(1+r)^n - 1} \]

Where:

\( P \) — Loan principal amount
\( r \) — Monthly interest rate (annual rate ÷ 12)
\( n \) — Total number of payments (loan term in years × 12)

Explanation: The calculator compares the total cost of the mortgage with and without points, helping you determine if paying points will save you money over the life of the loan.

3. Importance Of Points Comparison

Details: Comparing mortgage points is crucial for making informed financial decisions. Paying points can lower your monthly payment but requires upfront cash. This calculator helps determine the break-even point and overall savings.

4. Using The Calculator

Tips: Enter the loan amount, interest rate, loan term, select points option, and points rate. All values must be valid (positive numbers). The calculator will show monthly payment, points cost, and total payment.

5. Frequently Asked Questions (FAQ)

Q1: What are mortgage points?
A: Mortgage points are fees paid directly to the lender at closing in exchange for a reduced interest rate. One point equals 1% of the loan amount.

Q2: When does it make sense to pay points?
A: Paying points makes sense if you plan to stay in the home long enough to recoup the upfront cost through lower monthly payments.

Q3: How do I calculate the break-even point?
A: Divide the total cost of points by the monthly savings. The result is the number of months needed to break even.

Q4: Are points tax deductible?
A: Points paid on a mortgage to purchase or improve your main home may be deductible in the year paid. Consult a tax professional for advice.

Q5: Can I negotiate points with my lender?
A: Yes, points are often negotiable. Different lenders may offer different point structures, so it's worth shopping around.