Calculate when buying mortgage points pays off. Compare 0, 1, and 2 point scenarios side by side to find your break-even month and total interest savings.
Mortgage discount points let you pay upfront to lower your interest rate. Whether buying points makes financial sense depends mainly on how long you keep the loan and how much rate reduction the lender actually offers for the fee charged. Stay past the break-even month and the lower rate may save money; refinance or sell earlier and the upfront cost can outweigh the benefit.
This Mortgage Points Break-Even Calculator compares three scenarios — zero, one, and two points — side by side. You'll see the upfront cost, the monthly savings, the exact break-even month, and the total interest saved over the full term. Use it to make a data-driven decision before closing.
Buying points is especially worth analyzing when rates are high, because the monthly savings from a 0.25 % reduction is larger on a bigger base rate. Conversely, if you plan to move within a few years, skipping points usually wins.
Points only work when the payment savings recover the upfront fee before you exit the loan. This calculator shows the break-even month and the full-term interest impact so you can compare the buy-down with other uses of cash at closing.
Cost per point = Loan Amount × 1 %. Rate with N points = Base Rate − (N × Rate Reduction). Monthly Payment = P × r(1+r)^n / [(1+r)^n − 1]. Monthly Savings = Payment₀ − PaymentN. Break-Even Months = Cost of Points ÷ Monthly Savings.
Result: 1 point breaks even at month 60 (~5.0 years)
One point costs $4,000 (1 % of $400,000) and drops the rate from 7.0 % to 6.75 %. The monthly payment falls from $2,661 to $2,594, saving about $67/month. Dividing $4,000 by the monthly savings gives a break-even of 60 months. Over 30 years, buying one point saves about $20,054 after subtracting the upfront point cost.
The ideal candidate for mortgage points is someone who plans to stay in the home for many years, has excess cash at closing, and is borrowing at a relatively high rate. The larger the loan and the higher the base rate, the greater the monthly savings per point — and the faster you reach break-even.
If you're buying a starter home and plan to move within three to five years, the upfront cost of points likely won't be recovered. Similarly, in a falling rate environment, you may refinance before reaching break-even. Each refinance resets the clock because the old points are gone.
Instead of buying points, you could put the same cash toward a larger down payment. A bigger down payment reduces the loan amount (lowering the payment) and may eliminate PMI if you reach 20 %. Run both scenarios to find the better use of your cash at closing.
Last updated:
This page treats one point as 1% of the entered loan amount and compares the no-points payment path with one-point and two-point scenarios using the user-entered rate reduction per point. Break-even is calculated by dividing the upfront point cost by the monthly payment savings, while long-run net savings subtract the point cost from the difference in total scheduled interest across the term.
It is a buy-down worksheet rather than a lender pricing sheet. The actual rate improvement per point, tax treatment, and break-even outcome depend on the real quote, how long the borrower keeps the loan, and whether a refinance or sale happens before the break-even month.
A mortgage discount point is an upfront fee equal to 1% of the loan amount that can reduce the quoted mortgage rate. The exact reduction per point is lender-specific, so the best comparison is the actual rate sheet or Loan Estimate.
Divide the total cost of the points by the monthly savings from the lower rate. For example, if one point costs $4,000 and saves $67/month, the break-even is $4,000 ÷ $67 = 60 months (5 years). You start saving money in month 61.
It depends on how long you keep the loan, the size of the rate reduction, and what else you could do with the same cash at closing. If you exit the loan before break-even, points usually do not pay off.
Yes, many lenders offer fractional points. Half a point (0.5) would cost 0.5 % of the loan and typically reduce the rate by about 0.125 %. Ask your lender for a full rate sheet showing all available point options.
For a home purchase, points are generally fully deductible in the year paid. For a refinance, they must be amortized over the life of the loan. Consult a tax professional for your specific situation, as rules vary.
Discount points buy down your rate and are optional. Origination points are a lender fee for processing the loan and do not reduce your rate. Only discount points lower your interest rate and are analyzed by this calculator.