About the Mortgage Points Calculator
This mortgage points calculator tells you whether paying discount points at closing is worth it. One point costs 1% of the loan amount and typically lowers your rate by around 0.25 percentage points, though the exact trade varies by lender and day. You pay more upfront in exchange for a lower monthly payment for the life of the loan.
Enter the loan, term, the rate without points, how many points you are considering and the rate reduction per point from your lender quote. The calculator shows the upfront cost, the monthly savings, the break-even point in months, and your net savings (or loss) after the number of years you expect to keep the loan before selling or refinancing.
Break-even is the upfront cost divided by the monthly payment savings, which ignores the time value of money and the slightly faster principal paydown at the lower rate. If you are likely to move or refinance before the break-even month, points generally do not pay off.
With the default inputs, the break-even is 5 yr 1 mo. Change any value above to recalculate instantly.
How to use the mortgage points calculator
- 1Enter the loan amount and term.
- 2Enter the rate quoted with zero points.
- 3Enter the number of points and the rate cut per point from the lender’s quote.
- 4Enter how many years you expect to keep this loan.
- 5Buy points only if you will keep the loan well past the break-even month.
Formula and method
Each point costs 1% of the loan L, so p points cost L × p%. The new rate is the no-points rate r₀ minus p times the reduction per point d. M(r) is the monthly principal-and-interest payment at rate r over the full term, and S is the monthly savings.
Break-even is the number of months until cumulative savings cover the upfront cost, rounded up. Net savings over your stay is S × months kept − cost. The simple method ignores investment returns you could earn on the cash instead, so a longer break-even deserves extra caution.
- L
- Loan amount
- p
- Number of points
- r₀
- Rate with no points
- d
- Rate reduction per point
- S
- Monthly payment savings
Worked examples
2 points on a $400k loan at 7%
Two points cost $8,000 and drop the rate to 6.5%, saving $132.94 a month. It takes 61 months (just over 5 years) to break even; keeping the loan 10 years leaves you about $7,953 ahead.
1 point, but you might move in 4 years
One point costs $3,000 and saves $49.59 a month. Break-even is 61 months, so leaving after 48 months means losing about $620 — the points are not worth it.
1.5 points on a 15-year loan
Paying $7,500 lowers the rate to 5.875% and the payment by $101.52. Break-even comes at month 74; holding for the full 15 years nets about $10,774.
Frequently asked questions
What are mortgage points?+
Discount points are prepaid interest you pay at closing to get a lower interest rate. One point equals 1% of the loan amount — $4,000 on a $400,000 loan.
How much does one point lower the rate?+
A common rule of thumb is about 0.25 percentage points per point, but it varies by lender, loan type and market conditions. Always compare the lender’s actual rate sheet options.
How do I calculate the break-even on points?+
Divide the cost of the points by the monthly payment savings. If two points cost $8,000 and save $133 a month, the break-even is about 61 months.
Are mortgage points tax deductible?+
Points paid to buy your main home can often be deducted in the year paid if you itemize and meet IRS conditions; points on a refinance are usually deducted over the life of the loan. See IRS Publication 936.
When should I not buy points?+
Skip points if you expect to sell or refinance before the break-even month, if the cash would leave you short on reserves, or if the money could be better used for a larger down payment to avoid PMI.
Results are estimates for educational purposes and are not financial advice. Rates, fees and terms vary — confirm with your lender or a licensed advisor before making decisions.