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Discount Point Calculator

Should I pay discount points?

"Buying down" your interest rate on your mortgage with discount points (a form of prepaid interest) can save you money in the long run.
Use this calculator to determine if paying additional discount points in exchange for a lower interest rate is a good option for you. Not all companies offer discount points, and some have different prices for different points. The standard discount point cost is 1% of the loan and reduces the interest rate from 0.125% up to 0.25%, although numbers vary depending on the company.
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Mortgage Discount Points Key Factors

  1. Breakeven (Months)
    Homes are not always forever. The breakeven point is the time period in months when it becomes worthwhile to invest in discount points. Refinancing or selling before that period would result in a loss.
  2. Origination and Discount Points
    Origination points are fees some lenders may charge for evaluating and processing a mortgage. Discount points usually translate to a lower mortgage interest rate, and one point generally equals 1% of the mortgage.
  3. Mortgage Type
    The two main types of mortgages, ARM and Fixed-Rate have some differences. Fixed-Rate mortgages have an interest rate that is fixed throughout the term of the loan. An ARM (Adjustable-Rate Mortgage) typically has an interest rate that periodically changes, usually on an annual basis.
  4. Payment Difference

    The monthly savings received by putting money up front to act as a discount point.

  5. Savings Until Sell
    This figure is directly influenced by the “Years to Sell or Refinance” field. It is the amount that would be saved by having discount points during the time up until the sale or refinance date.
  6. Years to Sell or Refinance
    Do you want to understand the interest implication of selling early or refinancing? The interest paid will be shown as well as the percentage of interest vs. the principal per month when the “Show Amortization Schedule” button is selected.

Our financial calculators are provided as a free service to our Members. The information these calculators supply is from various sources based on calculations we believe to be reliable (but are not guaranteed, explicit, or implied) regarding their accuracy or applicability to your specific circumstances. All examples are hypothetical and illustrative and do not intend to provide investment advice. TDECU does not accept any liability for loss or damage whatsoever, which may be attributable to the reliance on and use of the calculators. Use of any calculator constitutes acceptance of the terms of this agreement. TDECU recommends finding a qualified professional for advice about your personal finance issues.