A person getting a mortgage to buy a home or property may choose to reduce the interest rate by paying additional cash up front.


(1) total amount of the mortgage

(2) initial fixed interest rate for the mortgage

(3) reduction in rate associated with 1 (percentage) point of the mortgage amount

(4) amount of money that the consumer wants to commit


one percentage point on the loan =

= 0.01 * (total amount)


number of points that the consumer wants to commit =

= (amount of money to commit) / (one percentage point of mortgage)


final interest rate =

= (original interest rate) - ((number of points) * (reduction in rate per point))

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