Mortgage calculator: points or money down?

Are you debating between increasing your down payment or paying for points? Consult a mortgage calculator to analyze the real costs of each option over the course of the loan. Here's what you need to know.

Paying down points will lower your rate, but doing so comes at a cost of 1 percent of the loan amount for each point. If you can afford the upfront fee and intend to stay in the house for a long time, it generally makes sense to pay for points.

However, the only way to know how long you'll need to stay in the house and how much you'll save is to use a mortgage calculator. By running the numbers with different estimates for how long you plan to keep the house, you'll see exactly when it's worth it to buy points.

Increase your down payment?

If you have the money and choose not to buy points, another option is to increase the size of your down payment. This will reduce costs both in terms of principal and interest over the life of the home loan.

However, the only way to make an informed decision is to know exactly how much money you could save by increasing the down payment. To do that, try plugging in different down payment amounts into your mortgage calculator.

Remember, if you're putting down less than 20 percent, there will likely be an additional built-in cost for private mortgage insurance. So, an increased down payment that puts you over the 20 percent threshold may net even more savings.

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