Mortgage Points Calculator United States
This mortgage points calculator shows whether buying down your rate pays off: the upfront cost, the monthly saving and the break-even month.
What it does
The Mortgage Points Calculator shows whether paying discount points to buy down your interest rate is worth it. It works out the upfront cost of the points, the monthly payment they save you, and the break-even month when the saving finally repays the cost.
Data sources & parameters
This calculator uses standard financial formulas and runs entirely in your browser. It needs no external rate data — your result is computed only from the values you enter above.
We always strive to use the latest data for every variable so our results and reports are as accurate as possible. Even so, errors are possible — you should not rely on this tool or its report alone, and we accept no liability for any decision made based on it.
The formula
Point cost = loan × points%; monthly saving = payment(rate without) − payment(rate with); break-even months = point cost ÷ monthly saving
How it works
It amortises your loan twice — once at the rate without points and once at the lower rate the points buy — to find the monthly saving, then divides the upfront point cost by that saving to get the number of months you must keep the loan to break even.
Where it is used
- Deciding whether to pay points on a new mortgage
- Comparing lender offers that trade points for a lower rate
- Checking if you will keep the loan long enough to profit
Worked example
Paying 1 point on a $300,000.00 loan costs … upfront and saves … a month, so you break even after … months.
Discount points let you pay cash at closing for a lower mortgage rate. The question is whether the monthly saving will ever add up to what the points cost. Enter your loan amount, the number of points, the rate without points and the lower rate the points buy, and the calculator shows the upfront cost, the monthly saving and the break-even month.
How discount points work
A point costs 1% of the loan amount and is paid to the lender at closing. On a $300,000 mortgage, one point is $3,000. Lenders often sell fractions, such as half a point or one and a half points. In return the rate drops, lowering every monthly payment for as long as you keep the loan. The lender and the market set the size of the reduction, so enter both rates from your lender's quote.
Calculating the break-even point
The calculator works out the monthly principal-and-interest payment at the higher rate and at the lower rate. The difference is your monthly saving. The point cost divided by that saving is the break-even point: how many months the loan must run before the savings equal what you paid. Keep the loan past that month and the points have paid for themselves.
When paying points makes sense
If you expect to stay in the home with the same mortgage for many years, buying the rate down can save real money. If you might sell or refinance within a few years, before the break-even month, you are unlikely to recover the cost, and the cash may be better kept as reserves or added to the down payment. Compare the break-even month with how long you realistically expect to keep the loan.
Money spent on points is gone if you sell early. If buying points would empty your emergency fund or shrink your down payment, the monthly saving may not be worth the lost flexibility. If you expect rates to fall, you may refinance long before break-even. Points make most sense when rates are relatively high, you have spare cash and you are confident you will keep the loan for a long time.
A worked example
Take a $300,000 loan over 30 years. Without points the rate is 6.5%, for a monthly principal-and-interest payment of about $1,896. One point costs $3,000 and lowers the rate to 6.25%, for a payment of about $1,847, a saving of about $49 a month. $3,000 divided by $49 gives a break-even of about 61 months, just over five years.
Over the full 30 years, the $49 monthly saving adds up to about $17,700 against the $3,000 cost, a net gain of about $14,700 before counting what the cash could have earned elsewhere.
How points differ from lender credits
Lender credits work the other way round: the lender pays part of your closing costs in return for a higher rate and higher payments. If you are short of cash for closing or plan to move soon, credits can make sense even though they cost more over time. If you have spare cash and plan to stay, points are usually the better deal. The same break-even logic applies to credits: work out how many months of higher payments it takes to use up the credit.
Common mistakes to avoid
The most common mistake is buying points without an honest estimate of how long you will keep the loan. Many homeowners move or refinance within the first several years, often before points break even. Another is confusing discount points, which lower your rate, with origination points, which are a lender fee that lowers nothing; only discount points belong in this calculation. Borrowers also forget the alternatives: the $3,000 could go into savings, pay down higher-rate debt or increase the down payment enough to avoid private mortgage insurance. Finally, ask your lender for a rate sheet showing the exact rate at zero, one and two points, and enter those figures here.
Assumptions and limitations
This is a planning estimate. It uses the standard fixed-rate amortization formula and assumes the rates and term stay fixed for the life of the loan. It compares only principal-and-interest payments and does not model taxes, insurance, private mortgage insurance, the return the cash could earn elsewhere or any tax deduction for the points. Confirm the exact rate reduction with your lender and check the current tax treatment before you commit.
About This Mortgage Points Calculator
Use this mortgage points calculator to get an instant estimate based on the figures you enter. Adjust the inputs above to match your situation, or browse all our calculators to plan your next step.
Frequently asked questions
What is a mortgage point?
How much does one point lower my rate?
What does the break-even point mean?
Are mortgage points worth it?
Are discount points tax deductible?
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