Mortgage Points Calculator — Cost vs Monthly Savings & Break-Even
Mortgage discount points let you pay upfront to lower your interest rate — typically 1 point costs 1% of the loan and reduces the rate by about 0.25%. On a $400,000 loan at 6.75%, buying 1 point ($4,000) might drop the rate to 6.50% and save roughly $65/month, breaking even in about 62 months. Enter your loan details to compare.
Points vs Savings
Break-Even
61 mo
$4,000 upfront · $66/mo saved
Methodology and limitations
Last reviewed:
Methodology
Compares base vs discounted monthly payments from discount points, estimates upfront points cost, monthly savings, break-even months, and lifetime interest saved.
Limitations
Planning estimate only. Actual rate buydown, lender pricing, tax treatment, and break-even timing depend on loan program, borrower profile, and how long you keep the mortgage.
Official sources
How Mortgage Points Break-Even Works
Mortgage discount points let you pay upfront to lower your interest rate — typically 1 point costs 1% of the loan and reduces the rate by about 0.25%. On a $400,000 loan at 6.75%, buying 1 point ($4,000) might drop the rate to 6.50% and save roughly $65/month, breaking even in about 62 months. Enter your loan details to compare.
Method used
This calculator prices discount points as a percentage of the loan amount, reduces the interest rate by the entered reduction per point, compares monthly payments at the base and discounted rates, and estimates break-even months and lifetime interest saved.
Points cost = loan amount × (points ÷ 100); new rate = base rate − (points × rate reduction per point); break-even months = points cost ÷ monthly savings
Practical example
Example: on a $400,000 loan at 6.75% for 30 years, buying 1 point at 1% of the loan ($4,000) that lowers the rate by 0.25% saves about $65 per month with break-even near 62 months if you keep the loan.
- $400,000 loan amount
- 6.75% base rate, 30-year term
- 1 discount point, 0.25% rate reduction per point
The output shows points cost, new rate, monthly payment savings, break-even months, lifetime interest saved, and whether points appear worth buying over the full term.
Assumptions
- Each point costs 1% of the loan amount unless you change the points input.
- Rate reduction per point is user-editable (default 0.25%).
- Break-even assumes you keep the loan and rate unchanged until payoff.
What this includes
- Points cost, new interest rate, payment comparison, monthly savings, break-even timing, and lifetime interest saved.
What this excludes
- Tax deductibility of points, APR disclosure rules, seller-paid points, refinance before break-even, and lender-specific buy-down menus.
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Frequently Asked Questions
What are mortgage discount points?
Discount points are upfront fees paid at closing to reduce your mortgage interest rate. One point equals 1% of the loan amount. Lenders typically reduce the rate by 0.125% to 0.25% per point, though the exact buydown varies by market and lender. Points increase closing costs but lower monthly payments and total interest over the loan life.
When does buying mortgage points make sense?
Points pay off when you stay in the home past the break-even point — the month when cumulative payment savings exceed the upfront cost. If you plan to sell or refinance within a few years, points rarely break even. This calculator shows break-even months so you can compare against your expected tenure.
How do I calculate mortgage points break-even?
Divide the total points cost by monthly payment savings. If 1 point on a $400,000 loan costs $4,000 and saves $65/month, break-even is about 62 months ($4,000 ÷ $65). If you stay longer, you net savings; if you leave sooner, you lose money on the points purchase.
Are mortgage points tax deductible?
Discount points on a primary residence purchase may be deductible in the year paid if you meet IRS requirements for points treatment. Refinance points are typically amortized over the loan term. Consult a tax professional — this calculator shows the financial tradeoff, not tax implications.
How many points should I buy?
There is no universal answer. Compare break-even months to how long you expect to keep the loan. Buying multiple points yields diminishing returns as each additional point reduces the rate less. Use this calculator to test 0, 1, 2, or more points against your loan amount and rate.