Mortgage Points Calculator
Decide whether paying discount points for a lower mortgage rate pays off, and when you break even.
About the Mortgage Points Calculator
Enter the loan amount, the rate without points, the number of points and the rate they buy, and the term. The calculator shows the upfront cost, the monthly saving, the month you break even and the saving if you keep the loan to the end.
Discount points are prepaid interest: each point costs 1% of the loan and typically lowers the rate by about 0.25 percentage points, though it varies by lender. They pay off only if you keep the loan past the break-even month.
The formula
Break-even months = cost of points ÷ monthly saving
Worked example
$400,000 over 30 years: 6.75% without points, 6.5% with 1 point
- 1 point costs $4,000
- Monthly saving: $66.12, so break-even ≈ 61 months (5 years 1 month)
- Kept for all 30 years: about $19,803 saved
Things to keep in mind
- Ignores what the $4,000 could earn elsewhere and tax effects.
- If you sell or refinance before the break-even month, points lose money.
Questions people ask
Are points tax-deductible?
Often, for a primary-residence purchase, as mortgage interest; see IRS Topic 504.
Should I buy points if I'll refinance?
Usually not; refinancing resets the clock.
What are lender credits?
The reverse: accepting a higher rate in exchange for money towards closing costs.