Sara Routhier, Director of Outreach and Managing Editor of Features, has professional experience as an educator, SEO specialist, and content marketer. She has over five years of experience in the insurance industry. As a researcher, data nerd, writer, and editor she strives to curate educational, enlightening articles that provide you with the must-know facts and best-kept secrets within the overw...

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Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He also has an MBA from the University of South Florida. ...

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Reviewed by Joel Ohman
Founder, CFP®

UPDATED: May 11, 2012

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Points are up-front fees on home loans that can be paid by borrowers who are interested in securing a lower interest rate.

This mortgage points calculator is designed to help borrowers determine whether or not a reduced interest rate is worth the cost of points.

The cost of a single mortgage point usually equates to 1 percent of an entire home loan’s amount, so if financing $200,000, each point would cost roughly $2,000.

Typically, the more points that borrowers are willing to pay when originating a mortgage loan the better the interest rate offers will be. In fact, Ginnie Mae says a single point usually reduces an offered interest rate by one-eighth of a percentage point.

Assuming your particular lender is willing to adhere to that formula, eight points would equate to a 1 percent interest rate reduction.

To make the most of this mortgage points calculator, borrowers should discuss with their lender exactly how much their interest rate will be reduced with a certain amount of purchased points. That way, borrowers can take that information directly to this calculator and calculate whether or not the deal is right for them.

Once the correct information has been obtained, enter your amount of financing you’ll need, the interest rate that’s offered without any purchased points, the number of points you’re considering to purchase, the interest rate offered if you do purchase those points, and the term (the duration) of the entire home loan.

Then click calculate and make an educated decision based on the results.

If you would like to see what rates other lenders will offer you, feel free to complete the mortgage loan application found at the bottom of your results after clicking calculate.

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