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.

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.

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 ...

Calculate the “break even” point for your loan. On a $300,000 fixed-rate mortgage at 6.5 percent over 30 years, your monthly payment for principal and interest would be about $1,896.