Mortgage Points Calculator
Should you buy discount points? Enter the loan, the buy-down per point, and how long you'll stay — see the exact break-even month and whether points pay off over your time horizon.
Loan & Points Details
The rate before buying points.
Cost: $3,500 (1% of loan per point).
Typical range: 0.20%–0.30%. Get the actual number from your lender's rate sheet.
Or how long until you'd likely refinance. U.S. median is about 8 years.
Verdict
You break even after 5y 0m — points make sense.
You plan to stay 7 years, which is past your break-even point. Over your expected stay you come out $1,360 ahead, and $17,328 ahead if you hold the loan to term.
Without Points vs. With Points
No Points
With 1 Point
Monthly Savings
$58
Break-Even
5y 0m
Net over 7y stay
$1,360
Net over full 30y term
$17,328
A note on taxes.
Discount points on a primary residence are generally tax-deductible as mortgage interest — fully in the year paid on a purchase loan, or amortized over the life of the loan on a refinance. The deduction only helps if you itemize and exceed the standard deduction. The numbers above are pre-tax; check with a tax professional for your situation.
Mortgage Points Break-Even Calculator Explained
Break-even is the whole decision, and it's one division. Take the upfront cost of the points and divide it by the monthly payment savings the lower rate buys you. The answer is the number of months you have to keep the loan before the points pay for themselves. Here it is with real numbers:
Worked example — 1 point on a $400,000 loan, 30-year term:
- One point costs 1% of the loan → $4,000 upfront at closing.
- A 0.25% buy-down takes the rate from 6.75% to 6.50%, dropping the payment from $2,594 to $2,528 → $66 a month saved.
- Break-even = $4,000 ÷ $66 = 60 months, exactly 5 years.
Keep the loan past month 60 and that $66 is pure savings every month for the rest of the term — roughly $790 a year, and about $19,800 net across a full 30-year mortgage. Sell or refinance before month 60 and you never recovered the $4,000. That single date is the answer to "are points worth it" for you.
Notice what does notchange the decision: the monthly payment is always lower with points, so "cheaper monthly" is never the question. Buying more points barely moves break-even either — 2 points on the same loan cost $8,000 and save $132/month, a break-even of 61 months instead of 60. Break-even is driven by the buy-down per point your lender offers, not by how many points you buy or how big the loan is. Ask for the exact rate at 0, 1, and 2 points and plug the real difference into the calculator above.
How many points to lower your mortgage rate by 1%?
At the standard 0.25%-per-point buy-down, a full 1.00% rate cut takes 4 points — and because each point costs 1% of the loan, that's 4% of your loan amount in cash at closing. On a $400,000 mortgage:
Worked example — buying the rate down a full 1% (6.75% → 5.75%):
- 4 points × 1% of $400,000 = $16,000 upfront.
- The payment drops from $2,594 to $2,334 → $260 a month saved.
- Break-even = $16,000 ÷ $260 = 62 months (5 years, 2 months).
Hold the loan to term and the full 1% buy-down nets about $77,600 after the $16,000 cost — but it only pays anything at all if you're still in the loan after year five.
The 4-point answer depends entirely on your lender's buy-down. At a weaker 0.20% per point you'd need 5 points ($20,000) for the same 1% cut, pushing break-even to 77 months. At a stronger 0.30% per point it takes only 3.3 points ($13,333)and break-even falls to 51 months. Confirm the per-point number on your rate sheet before assuming "4 points" applies to you.
Break-even by loan amount: $200k, $400k, $600k
Here's the part that surprises most buyers — the loan amount doesn't change your break-even month at all. The cost of a point and the monthly savings both scale with the loan, so they cancel out. A $600,000 borrower and a $200,000 borrower buying the same buy-down break even in the same month; only the dollar figures differ. All rows below assume a 30-year loan at 6.75% base:
| Loan amount | Points | Upfront cost | Monthly savings | Break-even |
|---|---|---|---|---|
| $200,000 | 1 pt (−0.25%) | $2,000 | $33 | 60 months |
| $400,000 | 1 pt (−0.25%) | $4,000 | $66 | 60 months |
| $600,000 | 1 pt (−0.25%) | $6,000 | $99 | 60 months |
| $200,000 | 4 pts (−1.00%) | $8,000 | $130 | 62 months |
| $400,000 | 4 pts (−1.00%) | $16,000 | $260 | 62 months |
| $600,000 | 4 pts (−1.00%) | $24,000 | $390 | 62 months |
The practical takeaway: bigger loans don't make points a better or worse deal — they just raise the stakes. A $600,000 borrower puts $24,000 on the line for the same 5-year payback a $200,000 borrower gets for $8,000. What actually moves break-even is the buy-down per point (see above) and nothing else, which is why the one number to pull off your loan estimate is the rate at 0 points versus the rate at 1 point.
Buy points if you plan to stay this long
Line your realistic time-in-loan up against the break-even month. Using the 60-month break-even above — which, as the table shows, applies at any loan size — the decision falls out cleanly:
| How long you'll keep the loan | Where you land | Verdict |
|---|---|---|
| Under 4 years | Well short of break-even | Skip points |
| 4–6 years | Straddles the 60-month break-even | Roughly a wash |
| 6–10 years | Past break-even, saving ~$790/yr per $400k | Buy points |
| 10+ years or full term | Years of pure savings | Buy points |
The cutoff shifts with your actual buy-down: a stronger 0.30%-per-point cut pulls break-even in to about 51 months, while a weak 0.20% cut pushes it out to 76 months — six years and four months, long enough to sink the deal for most buyers. Before committing the cash, weigh points against the other big lever on lifetime interest — a 15-year vs. 30-year term — and against the event that erases a bought-down rate entirely, a refinance.
Worth running before you commit: points are not the only way to cut lifetime interest, and the alternatives don't require cash at closing or a bet on how long you'll stay. Putting the same $4,000 toward the principal — or simply paying a bit more each month — shortens the loan without any break-even risk at all. Compare the buy-down against making extra mortgage payments and against a biweekly payment schedule, which squeezes in one extra payment a year with no upfront cost. If you might sell or refinance inside five years, those two beat points outright.
What Discount Points Actually Buy You
A discount point is a one-time, upfront fee that lowers your mortgage rate for the entire life of the loan. The pricing convention is fixed at 1% of the loan amount per point — one point on a $300,000 loan costs $3,000. In exchange, the lender drops your rate by a buy-down amount they set, typically in the 0.20%–0.30% range per point, with 0.25% being the most common number on real-world rate sheets.
That rate cut compounds across every payment for the rest of the loan. On a $300,000 30-year mortgage, taking the rate from 6.75% to 6.50% saves roughly $50 a month — small in any given month, but $18,000 over 30 years. The question is never "is the monthly cheaper" (it always is) — it's how long does it take to recover the upfront cost, and will you still be holding this loan when that day arrives.
That's the break-even calculation, and it's the only one that matters when deciding whether to buy points. Worth knowing before you commit the cash: buying down the rate is only one lever on lifetime interest. Shortening the term is the other, and it's usually the stronger one — compare a 15-year against a 30-year before assuming points are the best use of the money.
Discount Points vs. Origination Fees
Both are quoted in "points," both show up on the loan estimate, and both are calculated as 1% of the loan amount each. That's where the similarity ends.
- Discount points are optional and produce a permanent rate reduction. You are buying down the rate.
- Origination points / origination fee are what the lender charges to originate, underwrite, and close the loan. They are not optional with that lender and they do not change your rate.
When you compare loan estimates from two lenders, separate the discount points from the origination fee on each side before doing any math. A loan with one origination point and no discount points isn't equivalent to a loan with one discount point and no origination fee — the second one comes with a lower rate that lasts 30 years.
When Buying Points Is a Bad Deal
The math itself almost always shows monthly savings — that part isn't the decision. The decision is whether you'll be in the loan long enough to recover the upfront cost. Three scenarios where points reliably lose money:
- Short expected stay.If you're likely to sell within the break-even window (about 5 years on a 0.25%-per-point buy-down), you'll walk away from the points before they've paid for themselves. The U.S. median homeowner moves every 8 years; first-time buyers move sooner.
- Likely refinance.Points are a bet that you'll still hold this loan after the break-even date. If rates drop and you refinance, the new loan replaces the old one — your bought-down rate is gone, and the points cash with it. Avoid points when rates feel high or the curve is steeply inverted; both are setups for a refinance window inside the break-even period.
- Better use of the cash.If using that money for a larger down payment would push you past 20% LTV and eliminate PMI entirely, that's usually the bigger lever. Same goes for paying off a credit card at 22% APR, or hitting an employer 401(k) match. Compare points against the next-best use of the same dollars, not against the do-nothing alternative.
Negative Points & Lender Credits — the Mirror Case
The opposite of buying points is taking negative points, also called lender credits or rebate pricing. The lender pays a portion of your closing costs in exchange for a higher interest rate. Same math, flipped: you save cash upfront and pay more interest over time.
The break-even works the same way, in reverse. Lender credits are a good deal when:
- You're tight on closing-day cash and would rather not stretch to the full closing costs.
- You expect to sell, refinance, or pay off the loan before you would have caught up to the higher-rate payments — short expected stays and likely-refinance scenarios both favor credits over points.
- You expect rates to drop in the next 1–3 years. The credit-paid closing costs are real money in hand; the higher rate gets replaced when you refinance.
For long-term holders with cash on hand and a flat or rising rate outlook, discount points win. For short-term holders, refinance-likely borrowers, or anyone who'd rather keep the cash, lender credits often win. The calculator above handles both directions — enter a negative number in the points field to see the lender-credit scenario.
The Tax Angle on Points
Discount points on a primary residence are generally treated as prepaid mortgage interest by the IRS. On a purchase loan, you can usually deduct the full amount in the year you paid them, provided several conditions are met — the loan is secured by your main home, the points are an established practice in your area, and the amount isn't excessive. On a refinance, points must be amortized over the life of the new loan: $3,000 of points on a 30-year refi means $100 per year of deductible interest, not a single big deduction.
The catch: deductions only matter if you itemize. With the post-TCJA standard deduction at roughly $30,000 for joint filers, most homeowners don't itemize and the tax benefit on points is effectively zero. Don't let a vague "they're tax-deductible" line from a loan officer change the break-even math — confirm with a tax pro what the deduction is actually worth to you.
How to Read Your Lender's Rate Sheet
Every loan estimate should show three rate options: par (zero points, zero credits), buy-down with points, and rebate pricing with lender credits. The rate-reduction-per-point in this calculator's default (0.25%) is a placeholder — the only number that matters is the one on your lender's sheet for your loan on that day.
Ask for the buy-down sheet explicitly. Look at the rate at 0 points, the rate at 1 point, and the rate at 2 points. Plug the actual difference into this calculator. If your lender's sheet shows less than 0.20% per point of buy-down, points are priced poorly that day and you should usually take par or a credit instead.
Related Reading
- Closing costs — everything else due on closing day, so you can see what the points cash is competing against.
- Refinance calculator — the event that wipes out a bought-down rate. Check its break-even before you pay for points.
- 15 vs 30-year mortgage — the other way to cut lifetime interest, and often a bigger lever than buying down the rate.
- Extra payments calculator — what the same cash does against principal instead, with no break-even to clear.
- Biweekly mortgage calculator — one extra payment a year, zero upfront cost. The better move if you may move or refinance early.
Frequently Asked Questions
Is it worth buying mortgage points?
Points are worth it only if you keep the loan past the break-even month — the upfront cost divided by the monthly payment savings. At the common 0.25%-per-point buy-down, that lands right around 60 months, or almost exactly 5 years, on a typical 30-year loan (roughly 4 years at a strong 0.30% buy-down, closer to 6.5 years at a weak 0.20%). Stay longer and every month after break-even is pure savings for the rest of the term. Sell or refinance sooner and you lose the difference. So the answer turns on one question you already know the answer to: how long will you realistically hold this exact loan? Buyers confident in a long stay with cash to spare should buy points; anyone who might move or refinance inside the break-even window should not.
How many points do you need to lower your mortgage rate by 1%?
At the standard 0.25%-per-point buy-down it takes 4 points to cut your rate a full 1.00% — and since each point costs 1% of the loan, that's 4% of the loan amount in cash at closing. On a $400,000 mortgage that's $16,000 to move from 6.75% to 5.75%, which drops the payment from $2,594 to $2,334 and saves $260 a month. Break-even is $16,000 ÷ $260 = about 62 months. The 4-point figure is not universal, though: at a weaker 0.20% per point you'd need 5 points ($20,000), and at a stronger 0.30% per point only about 3.3 points ($13,333). Check the per-point buy-down on your own rate sheet before budgeting for it.
Does a bigger loan change the break-even on points?
No — and this catches most buyers off guard. The cost of a point and the monthly savings both scale directly with the loan amount, so they cancel out. One point at a 0.25% buy-down breaks even at about 60 months whether the loan is $200,000 (costing $2,000 and saving $33/month), $400,000 ($4,000 saving $66/month), or $600,000 ($6,000 saving $99/month). A larger loan doesn't make points a better or worse deal, it just raises the stakes on the same bet. What actually changes break-even is the buy-down per point your lender offers.
What is a mortgage discount point?
A discount point is a one-time fee you pay the lender at closing in exchange for a lower interest rate for the life of the loan. One point costs 1% of your loan amount — $3,000 on a $300,000 loan. In return, lenders typically knock 0.20%–0.30% off the rate per point, with 0.25% being a common rule of thumb. You can usually buy fractional points (half a point, three-quarters, etc.) on most rate sheets.
Are discount points the same as origination fees?
No. Both are quoted in 'points' (1% of the loan amount), which is where the confusion comes from. Discount points buy down your interest rate — they're optional and produce a real long-term benefit. An origination point (or origination fee) is what the lender charges to process the loan and is not optional with that lender. Origination points do not lower your rate. When comparing loan estimates, look at lender credits, origination points, and discount points separately — only discount points belong in a break-even analysis.
How do you calculate break-even on points?
Divide the upfront cost of the points by the monthly payment savings. Example: 1 point on a $300,000 loan costs $3,000 and saves about $50 per month at typical rates — break-even is $3,000 ÷ $50 = 60 months, or 5 years. If you stay in the home (and keep the loan) longer than that, you come out ahead. If you sell or refinance before, you lose money on the points. The calculator above does this math automatically with your actual rate-reduction-per-point.
Are mortgage points tax-deductible?
Discount points on a primary residence are generally treated as prepaid mortgage interest. On a purchase loan, the IRS usually allows them to be deducted in full in the year paid, provided several conditions are met (loan secured by your main home, points are a customary amount in your area, paid by you, etc.). On a refinance, points must be deducted ratably over the life of the new loan. The deduction only helps if you itemize — most filers take the standard deduction, in which case the tax benefit is zero. Always confirm with a tax professional.
When is buying points a bad deal?
Three big red flags. First, if you're likely to sell within the break-even window — a typical 5-year break-even doesn't survive a 3-year stay. Second, if rates may drop and you'd refinance — your buy-down evaporates when the new loan replaces the old one. Third, if you'd otherwise use that cash for a larger down payment (which can drop PMI entirely), pay off higher-rate debt, or fund retirement contributions. The opportunity cost of the points cash matters as much as the math on the loan itself.
What are negative points or lender credits?
The mirror image of discount points. With negative points (also called lender credits or rebate pricing), the lender pays a portion of your closing costs in exchange for a higher interest rate. Same math, flipped: you save cash upfront but pay more in interest over time. The break-even works in reverse — lender credits are a good deal if you'll sell or refinance before you would have caught up to the higher monthly payment. For short stays or when you expect rates to drop, taking the credit is often smarter than buying points.
How much does each point lower the rate?
The market convention is roughly 0.25% per point, but the actual buy-down varies by lender, loan program, market conditions, and the day's rate sheet. On any given day you might see 0.20% on one program and 0.30% on another. Ask your lender for the specific buy-down on your loan estimate, then plug that exact number into the calculator above instead of the 0.25% default. A buy-down of less than 0.20% per point is usually a sign points aren't priced well that day.