Mortgage Discount Points Calculator

How Much Can You Save on Your Mortgage with Discount Points?

If your credit score is holding you back from the mortgage interest rate you desire, don’t give up hope! When this happens, discount points are a great solution to helping you achieve the interest rate you want. Through purchasing discount points, you can expect to lower your interest rate by 1/8–1/4 of a percent per discount point. Each discount point is equal to 1% of your loan amount.

Use the mortgage discount points calculator to see how much you could save through purchasing discount points, and how long it would take to start encountering savings. Contact Homesite Mortgage if you have questions on how discount points could work for your situation.

Mortgage Discount Points Calculator Definitions

  1. Original Interest Rate: The original interest rate is the interest rate available to you without the use of discount points.
  2. Interest Rate with Discount Points: The interest rate with discount points is the updated interest rate you’ll receive after purchasing discount points.
  3. Discount Points: The discount points section is simply how many discount points purchased. The amount of discount points purchased will solely affect the amount of time it takes to recoup the cost of the discount points.
  4. Total Home Mortgage Amount: The total home mortgage amount is the total loan that you take out to purchase your home. This amount is exclusively the amount that is borrowed—it doesn’t include the down payment figure.
  5. Term of Loan: The term of loan is how long your mortgage is expected to last when the loan is established. Typical lengths are 15-year and 30-year mortgages.
  6. Original Rate: The original rate shows how much your monthly mortgage will be without discount points.
  7. With Discount Points: This figure reflects the updated monthly mortgage payment taking into account the purchased discount points.
  8. Monthly Payment Savings: The monthly payment savings shows how much you’ll save each month with discount points. This amount is the difference between the original rate and the amount with the discount points.
  9. Recoup Time: This timeframe shows how many months it will take for you to recoup the cost of the discount points. After those months have passed is when you’ll technically start saving money from your investment in discount points.

Mortgage Discount Points Calculator FAQs

How do I know my discount points will pay off?

Through the use of the mortgage discount points calculator, you can see how long it will take for the investment of the discount points to pay off and to start seeing real savings. This time frame to recoup the cost of discount points reflects the minimum amount of time you should plan to live in the house in order to make use of the purchased discount points.

How do discount points work?

Discount points are essentially opportunities to buy down your interest rate. As mentioned above, each discount point will cost around 1% of your total loan amount. If you take out a $200,000 loan, one discount point will cost $2,000.

Are discount points tax-deductible?

Discount points are traditionally tax-deductible, but depend on which deductions you’re allowed to claim on your income taxes. Speak with your tax preparer to find out if you are eligible to deduct discount points on your federal income taxes.