Calculate when buying mortgage points pays off. Compare 0, 1, and 2 point scenarios side by side to find your break-even month and total interest savings.
Mortgage discount points let you pay upfront to lower your interest rate — typically 0.25 % per point at a cost of 1 % of the loan amount. Whether buying points makes financial sense depends entirely on how long you keep the loan. Stay past the break-even month and the lower rate saves you money; sell or refinance earlier and you lose.
This Mortgage Points Break-Even Calculator compares three scenarios — zero, one, and two points — side by side. You'll see the upfront cost, the monthly savings, the exact break-even month, and the total interest saved over the full term. Use it to make a data-driven decision before closing.
Buying points is especially worth analyzing when rates are high, because the monthly savings from a 0.25 % reduction is larger on a bigger base rate. Conversely, if you plan to move within a few years, skipping points usually wins.
Lenders often present points as a no-brainer, but the math depends on your time horizon. This calculator removes the guesswork by showing exactly when each scenario breaks even and how much you save — or lose — at any point in the loan. It's the fastest way to compare the true cost of buying down your rate.
Cost per point = Loan Amount × 1 %. Rate with N points = Base Rate − (N × Rate Reduction). Monthly Payment = P × r(1+r)^n / [(1+r)^n − 1]. Monthly Savings = Payment₀ − PaymentN. Break-Even Months = Cost of Points ÷ Monthly Savings.
Result: 1 point breaks even at month 57 (~4.75 years)
One point costs $4,000 (1 % of $400,000) and drops the rate from 7.0 % to 6.75 %. The monthly payment falls from $2,661 to $2,594, saving $67/month. Dividing $4,000 by $67 gives a break-even of 60 months. Over 30 years, buying one point saves $20,117 in total interest.
The ideal candidate for mortgage points is someone who plans to stay in the home for many years, has excess cash at closing, and is borrowing at a relatively high rate. The larger the loan and the higher the base rate, the greater the monthly savings per point — and the faster you reach break-even.
If you're buying a starter home and plan to move within three to five years, the upfront cost of points likely won't be recovered. Similarly, in a falling rate environment, you may refinance before reaching break-even. Each refinance resets the clock because the old points are gone.
Instead of buying points, you could put the same cash toward a larger down payment. A bigger down payment reduces the loan amount (lowering the payment) and may eliminate PMI if you reach 20 %. Run both scenarios to find the better use of your cash at closing.
A mortgage discount point is an upfront fee equal to 1 % of the loan amount that typically reduces your interest rate by about 0.25 %. On a $400,000 loan, one point costs $4,000. Points are prepaid interest that lowers your monthly payment for the life of the loan.
Divide the total cost of the points by the monthly savings from the lower rate. For example, if one point costs $4,000 and saves $67/month, the break-even is $4,000 ÷ $67 = 60 months (5 years). You start saving money in month 61.
It depends on how long you keep the loan. If you stay past the break-even month, points save you money. If you sell, refinance, or pay off the mortgage before break-even, you lose money on the points. Most break-even periods fall between 4 and 7 years.
Yes, many lenders offer fractional points. Half a point (0.5) would cost 0.5 % of the loan and typically reduce the rate by about 0.125 %. Ask your lender for a full rate sheet showing all available point options.
For a home purchase, points are generally fully deductible in the year paid. For a refinance, they must be amortized over the life of the loan. Consult a tax professional for your specific situation, as rules vary.
Discount points buy down your rate and are optional. Origination points are a lender fee for processing the loan and do not reduce your rate. Only discount points lower your interest rate and are analyzed by this calculator.