1. What is Mortgage Points Break Even?

The break-even point for mortgage points is when the upfront cost of buying points equals the savings from the reduced monthly payments. This calculator helps determine how many months it will take to recover the cost of purchasing mortgage points.

2. How Does the Calculator Work?

The calculator uses the simple formula:

Where:

• Cost of Points — The upfront fee paid to reduce the interest rate
• Payment Reduction — The monthly savings from the lower interest rate

Explanation: The equation calculates how many months of reduced payments are needed to equal the initial cost of the points.

3. Importance of Break Even Calculation

Details: Knowing the break-even point helps determine if buying points makes financial sense based on how long you plan to keep the mortgage.

4. Using the Calculator

Tips: Enter the total cost of the points in USD and the monthly payment reduction in USD. Both values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What are mortgage points?
A: Points are fees paid to the lender at closing in exchange for a reduced interest rate. One point equals 1% of the loan amount.

Q2: Is buying points always a good idea?
A: Only if you plan to stay in the home beyond the break-even point. Otherwise, you lose money by paying for points.

Q3: How accurate is this calculator?
A: It provides a basic estimate. Actual savings may vary slightly due to factors like tax deductions on mortgage interest.

Q4: Should I buy points if I plan to refinance soon?
A: Generally no, unless the refinance is many years away and you'll pass the break-even point before then.

Q5: Can points be financed into the loan?
A: Yes, but this increases your loan amount and total interest paid over time.