Mortgage Points Calculator
The Points vs. No Points calculator will help you determine whether or not paying for points is the best option for you. Points are sometimes referred to as loan discount points. Points are prepaid interest on your loan. Usually, homebuyers will pay points to lower the interest rate and save on taxes, since points usually tax deductible as interest, You may want to follow the rule of thumb that says that the longer you intend to keep the loan, the more points you should consider.
Note: The examples below are based on the assumption that the calculator is refreshed with the default values loaded in.

Loan Rate   This is the interest rate of Lower Points loan. You may use the diamond-shaped slider to enter the value or enter it directly in the edit box
Points   Points are considered prepaid interest on a loan. You may use the diamond-shaped slider to enter the value or enter it directly in the edit box.
Loan Amount   This is the length of time you want the loan. Use the diamond-shaped slider to enter the value or enter it directly in the edit box.
Loan Term   This is the length of time you want the loan. Use the diamond-shaped slider to enter the value or enter it directly in the edit box.
Savings Rate   This savings rate is what you would earn on the money you use to pay the points if you do not pay the points. Also this is the rate you would earn on the monthly savings form paying the points for the higher points loan. Use the diamond-shaped slider to enter the value or enter it directly in the edit box.
Tax Rate This is your tax rate. Use the diamond-shaped slider to enter the value or enter it directly in the edit box.

On the right you can adjust the variables for the Higher Points Option.

Loan Rate This is the interest rate of the Higher Points loan you are considering. Use the diamond-shaped slider to enter the value or enter it directly in the edit box.
Points   Points are prepaid interest assessed at closing by the lender. Each point is equal to 1 percent of the loan amount (e.g., two points on a $100,000 mortgage would cost $2,000).
 

For example, you may ask, 'Should I pay 2 or 3 points?

Once you have entered all the information, the graph in the lower right will plot your cumulative savings for both the lower and higher point options. Over time you can see that the higher points option will save you more. Using the diamond-shaped slider on the graph you can determine how many years you need to keep your home in order for points to be a worthwhile investment. Where the lines intersect is the break-even point, moving the slider to that point, you will see that it corresponds to a year. If you plan to sell the house before that time, the lower points option is the loan to go with. If you plan to keep the house for longer than that, the higher points option is better for you. Feel free to adjust the variables to answers questions you may have about your situation. Here are some questions to get you started.
    Should I go with a 8% with 1 point or one with 6.5 and 2 points?
How much would I save with a 6% savings rate?
If my tax rate went from 36% down to 28%, would I improve the amount I save by paying more points?
If I went with a 15 year loan term will still save by paying for more points
As always, the answers are only as far as a mouse click or a mouse drag away. Your answers appear in the results window at the bottom. Have fun playing with the planner.