Calculators
Points vs. Lender Credit Calculator
Paying points lowers the payment. Taking a lender credit lowers what you pay up front. Enter both options from your Loan Estimates and see how many months it takes for the lower payment to earn back the extra cost.
- No rate needed
- Nothing you enter is sent anywhere
Points or a lender credit: how long until paying more up front pays off?
Enter two options for the same loan, straight from the Loan Estimates or a quote. The calculator shows how many months of the lower payment it takes to earn back what you paid extra up front, next to how long you expect to keep the loan. No rate needed. Nothing you enter is sent anywhere.
Option A
For example, the lower payment with points.
Option B
For example, no points, or a lender credit.
Five-year check from page 3 (optional)
Page 3 of each Loan Estimate, under Comparisons, In 5 Years. Total paid less principal paid off is what each option costs you over five years, counting how much of each payment went to paying down the loan.
Option A
Option B
Enter the monthly principal and interest for both options, and the points or credit on either.
Break-even
| After | Option A | Option B |
|---|
Holding two full Loan Estimates? Our Loan Estimate check reads both and compares every box.
“If you’re making a change to your mortgage and there are costs involved, how long does it take before the benefit of that change has made up for those costs? That’s the idea.”Samantha Shelton
Go over the options with SamanthaArithmetic on the figures you entered, not a quote or a recommendation. The table compares what you pay up front plus principal and interest; the five-year check also counts principal paid off. Pricing changes by lender and by day, so compare options priced on the same day. Align Lending LLC, NMLS #2041154. Equal Housing Opportunity.
The terms
Points, credits and par
Discount points
Discount points are an upfront fee paid to lower the interest rate for the life of the loan. One point costs 1% of the loan amount. How much a point lowers the rate varies by lender and by day, so the useful question is how many months of lower payments it takes to earn the cost back.
Lender credit
A lender credit is money the lender puts toward your closing costs in exchange for a higher interest rate. It is the reverse of paying discount points. It can make sense if you expect to sell or refinance within a few years, because you pay less up front and the higher rate has less time to cost you.
Par rate
The par rate is the interest rate, on a given day, that comes with no discount points and no lender credit. Rates below it cost points; rates above it pay a credit toward closing costs. Knowing where par sits makes it easier to compare offers that mix rates and fees in different ways.
Where to find the numbers
Every figure is on the Loan Estimate
Page 1, Projected Payments
The monthly principal and interest for each option.
Page 2, Section A
Points, listed as a share of the loan amount with the dollar amount beside it.
Page 2, Section J
Lender Credits, shown as a negative number that lowers your costs.
Page 3, In 5 Years
Total you will have paid and principal you will have paid off, for the five-year check.
Questions about points and lender credits
If yours is not here, send Samantha both options and she will go over them with you.
Why does how long I keep the loan matter so much?
Because points are paid once, up front, and the lower payment earns them back a month at a time. Sell or refinance before the break-even month and, by these figures, the points were not earned back. That is why one of Samantha’s first questions is how long you realistically expect to keep the mortgage.
Why add the five-year check?
At the same loan amount, a lower payment can mean more of each payment goes to principal. Total paid less principal paid off, from page 3 of each Loan Estimate, is what each option costs you over five years with that counted.
Can I compare options from two different lenders?
Yes, as long as they are for the same loan amount, term and loan type, priced the same day. Our Loan Estimate check reads two Loan Estimates and lines up every box.
Does Align recommend paying points?
No single answer fits everyone. It turns on how long you keep the loan and how much cash you want to keep at closing. Samantha will lay the options side by side for your loan so you can decide.
Keep going
More ways to check the numbers
Loan Estimate check
Upload a Loan Estimate and get feedback on what the lender charges.
Loan Estimate checkRefinance break-even
Months until a refinance pays for itself, against how long you keep the loan.
Refinance break-evenRent vs. buy
When owning starts to cost less than renting, from your own numbers.
Rent vs. buyAll calculators
Every Align tool in one place, grouped by the question it answers.
All calculatorsAlign Lending LLC, NMLS #2041154, is a mortgage broker. Samantha Shelton, NMLS 1647301. Equal Housing Opportunity. Licensed in Michigan, Ohio, North Carolina, Florida, Louisiana and Texas. The calculator shows arithmetic on the figures you enter. It is not a quote, a credit decision, an offer of credit or a recommendation.
