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Mortgage Points Calculator
Find out how much mortgage points cost, how much you'll save each month, and when you'll break even on the upfront investment.
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Points Cost
Monthly Savings
Break-Even Period
Total Savings Over Term
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How Mortgage Points Work
Mortgage discount points are a form of prepaid interest. Paying points upfront reduces your interest rate, which lowers your monthly payment for the entire loan term. Each point costs 1% of your loan amount and typically reduces your rate by 0.25%, though the exact reduction varies by lender.
The key question is whether the long-term savings justify the upfront cost. This calculator shows your break-even point — the number of months you must keep the loan for the savings to exceed the cost of the points. If you plan to stay in the home or keep the loan past the break-even period, buying points is generally a smart financial move.
Break-Even Formula
The break-even calculation is straightforward: Break-Even Months = Points Cost ÷ Monthly Savings. The points cost is your loan amount multiplied by the number of points (e.g., $300,000 × 1% = $3,000 for one point). The monthly savings is the difference between your payment at the base rate and your payment at the discounted rate.
For example, one point on a $300,000 loan at 7.0% (reduced to 6.75% for 30 years) costs $3,000 and saves roughly $50/month. Break-even = $3,000 ÷ $50 = 60 months (5 years). If you keep the mortgage longer than 5 years, you come out ahead. The total savings over the full 30-year term would be approximately $18,000 minus the $3,000 upfront cost — a net gain of $15,000.
When to Buy Points
Buying points makes the most sense when you have available cash at closing, you plan to stay in the home long-term (past the break-even period), and current interest rates are relatively high. In a high-rate environment, the absolute monthly savings are larger, which shortens the break-even period. Points are generally less attractive if you expect to sell or refinance within a few years, since you won't have enough time to recoup the upfront cost through monthly savings.
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Points vs. Larger Down Payment
An alternative to buying points is putting more money toward a larger down payment, which reduces your loan balance (and therefore total interest paid). Which is better depends on your situation. A larger down payment directly reduces principal and eliminates PMI sooner, while points specifically target the interest rate. If your down payment is already 20% or more and you have extra cash, points can be an effective way to reduce your long-term interest cost.
Frequently Asked Questions
What are mortgage points?
Mortgage points, also called discount points, are upfront fees paid to the lender at closing in exchange for a lower interest rate. One point equals 1% of your loan amount — so one point on a $300,000 mortgage costs $3,000. Each point typically reduces your interest rate by 0.25%, though this can vary by lender and market conditions. Points are generally tax-deductible as prepaid interest.
How do I calculate the break-even on mortgage points?
The break-even point is how long it takes for your monthly savings to recoup the upfront cost of buying points. Divide the total cost of the points by your monthly payment reduction. For example, if you paid $4,000 for points and save $50 per month, your break-even is 80 months (about 6.7 years). If you plan to stay in the home longer than the break-even period, buying points likely makes financial sense.
Are mortgage points always worth buying?
Whether points are worth buying depends on how long you keep the loan. If you sell, refinance, or pay off the mortgage before the break-even period, you will lose money on the points. Points make the most sense when you plan to stay in the home long-term, have cash available at closing, and are buying in a high-interest rate environment. Points are generally not worth it if you plan to move within a few years.
How many mortgage points can I buy?
Lenders typically allow you to purchase up to 3–4 discount points, though some allow more. The exact limit depends on your lender, loan type, and the loan-to-value ratio. There is also a practical limit — once the rate is already low, additional points yield diminishing returns. Most borrowers find that 1–2 points provides the best balance between upfront cost and long-term savings.
What is the difference between discount points and origination points?
Discount points are prepaid interest used to buy down your mortgage rate — these are what this calculator addresses. Origination points are fees charged by the lender for processing the loan and do not reduce your interest rate. Both cost 1% of the loan amount per point, but they serve different purposes. Always clarify with your lender whether quoted points are discount points (which lower your rate) or origination fees.
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