Points are fees paid to lenders. Each point is equal to 1% of the loan amount. On a $100,000 loan, 1 point is $1000. Points may be further classified into origination points or discount points. Origination points are fees paid to a lender for processing a loan application. The origination fee is stated in the form of points. Discount points are fees paid to lenders and each point is equal to 1% of the loan amount.
The loan discount points may vary from 1 to 6% or more of the loan amount and, therefore, can account for a large portion of the closing costs. If you're confused, don't feel alone. Understanding points can be confusing. For additional information please consult a broker/lender.
This calculator will compare two mortgages: one with a lower interest rate and one with fewer points.
Place your cursor in the fields and fill in the requested information to the best of your knowledge. Use the tab key on your keyboard to move through the form. Once the required fields are completed, the form will automatically populate with the information you have requested.
If the total cost for each of the two mortgages is reasonably close, choose the one with the lower annual percentage rate (APR). However, if the APR's are close and there is a significant difference in the total cost, you are probably better off choosing the mortgage with the lower long-run cost.
