The interest rate your lender gives you isn't the true cost of your mortgage. Learn how to calculate your effective interest rate, including any discount points.

In this example, the borrower bought two discount points costing 1 percent of the loan principal, or $3,200 each. By buying two points for $6,400 upfront, the borrower’s interest rate shrank to ...

A buyer getting a $300,000 mortgage could pay $3,000 for one discount point to cut the mortgage rate from 7% to 6.75%. The monthly payment would shrink by $50.

To see how discount points can affect interest rates, closing costs, and monthly payments, consider the example below, which shows the impact of having a different number of points on a 30-year ...

How can I tell if it’s worth paying for discount points? Calculate the “break even” point for your loan. On a $300,000 fixed-rate mortgage at 6.5 percent over 30 years, ...