|Break-Even||4 years 2 months|
more / (less)
|This mortgage calculator assumes that you itemize your deductions on Schedule A of your Federal tax return and that you qualify for the home mortgage interest deduction without limitation. Tax savings may be reduced or eliminated for higher income taxpayers that have their allowable itemized deductions limited; for taxpayers with loan amounts exceeding the maximum; and other factors. The information and calculators are intended for your independent use as self help tools and are not intended to provide investment advice. We cannot and do not guarantee their applicability or accuracy with regard to your individual circumstances. All examples are hypothetical and for illustrative purposes only. We strongly encourage you to seek personalized advice from qualified professionals regarding all personal finance matters.|
(Paid In Cash)
(Principal and Interest)
|For a Holding Period of 10 years|
|Monthly Costs PI||($3,089)|
|Lost Interest - Points||$140|
|Tax Savings - Points||$483|
|Tax Savings - Interest||($1,116)|
|Reduction in Principal||$1,210|
|Net Savings / (Loss)||$1,843|
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|» Today's Mortgage Rates||» Get the Best Mortgage||» Should I Pay Points?|
How do you decide if you should pay mortgage points or not? The simple approach of dividing the cost of the points by the monthly savings on your payment does not take into account critical information like the impact of tax deductions and your potential earnings on any savings that could be invested. This example walks you through the decision process.
We assume the borrower is using the mortgage to buy his or her primary residence, plans to keep the mortgage for 10 years, is in the 25% tax bracket and earns 1% on investments. For a 30 year mortgage for $180,000 we compare paying 1 point for a 3.75% rate and paying 0 points for a 4% mortgage rate. After reviewing this example, use the mortgage rates and points calculator to determine whether you should pay mortgage points or not.
Example: Pay Mortgage Points or No Points?