You want to save the most money on your mortgage. However, you also want to maximize your overall financial situation. Most mortgage point calculators only use the break-even method.
The break-even method is good. However, its limited. Primarily, it doesn’t show you how to maximize your overall financial situation.
To do so, you need to look at the investment method.
Fortunately, FitBUX’s mortgage point calculator puts the ability to do both at your finger tips.
This guide walks you through how to use our mortgage point calculator. It also, describes the break-even method, the investment method, and how they help you decide if paying mortgage points are worth it.
Before using our mortgage point calculator, I highly recommend reading our guide to mortgage points. It will help you save $1,000s!
Using FitBUX’s Mortgage Point Calculator To Get Estimates
This calculator will help you determine if paying points on a mortgage is beneficial to you. If they are, it will also help you to determine the optimal number of points to pay.
Step 1: Accessing The Calculator
To access the calculate, join FitBUX as a free member and build your profile. Building your profile will also give you access to our one-of-a-kind financial planning technology should you choose to use it.
Step 2: Enter The Calculator
From your FitBUX dashboard, click Tools & Products from the left hand menu. Then choose ‘Home Ownership’. From there choose ‘Mortgage Point Calculator.’
Step 3: Amount & Term
On the first screen enter the mortgage length and mortgage amount. The mortgage length is important for the investment method because you need a time period to compare your options.
Step 4: Interest Rates & Points
The next step in the mortgage point calculator is to enter the interest rate for each point offer. Specifically, you will need to enter the mortgage interest rate you would be receiving if you didn’t pay points.
Also, you’ll want to enter the points as basis points. For example 1 point, or 1%, is equal to 100 basis points. 1.25 points is equal to 125 basis points.
You’ll be able to enter two different point offers on this step. For example, you have an offer for 1 point and another for 2 points. You’ll be able to enter both.
Step 5: Break-Even Results
The first result calculates the break-even rate. This means it will tell you the time period it takes to recoup the money you spent upfront.
The last step in the mortgage point calculator calculates the investment method. To get to it, click the toggle on top of the break-even method.
The investment method has two calculations. One for the situation whereby you use your monthly savings to pay off the mortgage faster. Then once the mortgage is gone you invest the money.
The second situation is where you take the monthly savings and invest it.
To make the decision on how many points to pay, you’ll want to choose the one that maximizes your finances over the term of the loan.
Additional Home Ownership Resources
- Mortgage Points: The Guide That Saves You $1,000s
- Mortgage Payoff Calculator
- 5 Items To Know When Buying A House With Student Loans
By Joseph Reinke, CFA