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Mortgage Loan Points Calculator

Cost of one point equals mortgage loan amount divided by 100

Solution

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Cost of One Point

A mortgage point equals 1% of the loan amount, paid upfront at closing. Each point typically reduces the interest rate by about 0.25%. Buying points makes sense if you plan to keep the loan long enough for the monthly savings to exceed the upfront cost.

Cost = Loan Amount / 100

Total Cost of Points Paid

This calculator finds the total dollar cost when buying multiple points. You can also reverse the calculation to find how many points you paid based on the cost.

Total Cost = Cost per Point × Number of Points

How It Works

A mortgage point equals 1% of the loan amount, paid upfront at closing. Each point typically reduces the interest rate by about 0.25%. Buying points makes sense if you plan to keep the loan long enough for the monthly savings to exceed the upfront cost. This calculator finds the dollar cost of one point and the total cost when buying multiple points. You can also reverse the calculation to find how many points you paid based on the cost.

Example Problem

You take a $300,000 mortgage and buy 2 points to lower your rate.

  1. Write the one-point formula: COOP = MLA / 100.
  2. Substitute the mortgage amount: COOP = 300,000 / 100 = 3,000.
  3. Interpret the result: one point costs $3,000 on a $300,000 loan.
  4. Write the total-points formula: COPP = COOP × NP.
  5. Substitute the values: COPP = 3,000 × 2 = 6,000.
  6. Total upfront cost for 2 points = $6,000.

If each point reduces your rate by 0.25%, you drop from 7% to 6.5%, saving about $100/month. The break-even point is $6,000 / $100 = 60 months (5 years).

When to Use Each Variable

  • Cost of One Point — when you know the loan amount and want to see how much a single discount point costs at closing.
  • Total Cost of Points — when you know the per-point cost and want to find the total upfront cost for multiple points, or reverse-calculate how many points you paid.

Key Concepts

A mortgage point is equal to 1% of the loan principal. Discount points reduce the interest rate (typically by about 0.25% per point), while origination points are a lender fee that does not affect the rate. The break-even period — the time it takes for cumulative monthly savings to exceed the upfront cost — determines whether buying points is financially worthwhile.

Applications

  • Home purchasing: deciding whether to buy points to lower your monthly payment
  • Refinancing: comparing the cost of points against the interest savings over the remaining loan life
  • Financial planning: calculating break-even periods to match your expected time in the home
  • Loan comparison: evaluating lender offers that bundle different combinations of rate and points

Common Mistakes

  • Confusing discount points (lower the rate) with origination points (a lender fee) — only discount points reduce your interest rate
  • Ignoring the break-even period — buying points is a loss if you sell or refinance before recouping the upfront cost
  • Calculating points on the home price instead of the loan amount — points are always 1% of the mortgage, not the purchase price

Frequently Asked Questions

What is the formula for mortgage points?

One discount point equals 1% of the mortgage loan amount, so cost of one point = loan amount / 100. Total points cost = cost per point × number of points. On a $350,000 mortgage, one point costs $3,500.

Are mortgage points tax deductible?

Points on a purchase mortgage are usually deductible in the year paid. Refinance points must be amortized over the loan life.

How many points should I buy?

Calculate break-even: divide points cost by monthly savings. If you plan to stay longer than break-even, points are worthwhile.

What is the difference between discount points and origination points?

Discount points reduce your rate. Origination points are a lender fee. Both equal 1% of the loan. On a $250,000 loan, each point costs $2,500.

How do I know if buying points is worth it?

Compare the upfront cost of the points to the monthly payment savings from the lower rate. Divide total points cost by monthly savings to find the break-even period. If you expect to keep the mortgage longer than that, points may make sense.

Do points depend on the home price or the loan amount?

Points are always calculated from the mortgage loan amount, not the purchase price. If you buy a $500,000 home with 20% down, the mortgage is $400,000, so one point costs $4,000.

Can points be financed into the loan?

Sometimes. Some lenders allow you to roll points into the mortgage instead of paying them entirely in cash at closing. That lowers upfront cash needs but increases the loan balance and total interest.

How much does one point usually lower the mortgage rate?

A common rule of thumb is that one discount point reduces the mortgage rate by about 0.25%, although the exact reduction varies by lender, market conditions, and loan type.

Reference: Brueggeman, William B. and Fisher, Jeffrey D. Real Estate Finance and Investments. McGraw-Hill Education.

Mortgage Points Formulas

Discount points are priced as a percentage of the loan amount. One point equals 1% of the mortgage, and multiple points scale linearly.

Cost of One Point

COOP = MLA / 100

Total Cost of Points

COPP = (MLA / 100) × NP

  • MLA = mortgage loan amount
  • COOP = cost of one point
  • COPP = total cost of points paid
  • NP = number of points purchased

Worked Examples

Home Purchase

What does one point cost on a $320,000 mortgage?

  • COOP = MLA / 100
  • COOP = 320,000 / 100
  • COOP = 3,200 $

Rate Buydown

If a borrower buys 2.5 points on a $400,000 mortgage, what is the total cost?

  • COPP = (MLA / 100) × NP
  • COPP = (400,000 / 100) × 2.5
  • COPP = 10,000 $

Closing Disclosure

If points cost $5,400 on a $270,000 mortgage, how many points were paid?

  • NP = COPP × 100 / MLA
  • NP = 5,400 × 100 / 270,000
  • NP = 2 points

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