Mortgage Points Calculator
Paying points means paying now for a lower rate later. Enter both quotes to see the break-even month and what you net by the time you sell or refinance.
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Educational estimates only. Not financial, tax, or lending advice.
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Are mortgage points worth it?
They are if you keep the loan past the break-even month. In the example below, 1 point on a $400,000 loan costs $4,000 and cuts the rate from 6.75% to 6.5%. The payment falls by $66.12 a month, so the points pay for themselves after 61 months (5 years 1 month).
Keep the loan 7 years and you come out $3,039 ahead. Leave after two and you are behind. The answer depends on how long you stay, which is why the number of years you expect to keep the loan is an input here.
Are the points worth it?
Cost of the points
$4,000
1 point on $400,000, due at closing.
Monthly saving
$66.12
$2,594.39 without points, $2,528.27 with.
Break-even
5 years 1 month
Month 61: the points cost divided by the monthly saving.
Net after 7 years
$3,039
Ahead if you keep the loan that long and pay it off then.
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These points buy a 0.25 point cut in the rate each. Counting the smaller balance the lower rate leaves you with, the net result turns positive in 4 years. If you keep the loan to the end of its term, the net result is $19,803. For the reasoning behind points, read are discount points worth it.
Net result by year
| Leave after year | Net result |
|---|---|
| 1 | -$2,999 |
| 2 | -$1,995 |
| 3 | -$989 |
| 4 | $18 |
| 5 | $1,026 |
| 6 | $2,033 |
| 7 | $3,039 |
| 8 | $4,042 |
| 9 | $5,041 |
| 10 | $6,034 |
| 11 | $7,020 |
| 12 | $7,996 |
| 13 | $8,961 |
| 14 | $9,912 |
| 15 | $10,847 |
| 16 | $11,762 |
| 17 | $12,653 |
| 18 | $13,519 |
| 19 | $14,353 |
| 20 | $15,153 |
| 21 | $15,912 |
| 22 | $16,625 |
| 23 | $17,286 |
| 24 | $17,889 |
| 25 | $18,425 |
| 26 | $18,887 |
| 27 | $19,267 |
| 28 | $19,553 |
| 29 | $19,736 |
| 30 | $19,803 |
Net result = the payments you save, plus the smaller balance you still owe, minus what the points cost. It assumes you pay the loan off or sell at the end of that year and ignores what the money would have earned elsewhere. Your year of stay is outlined.
How the break-even is worked out
Cost of the points divided by what they save each month.
One point is 1% of the loan. The calculator prices both loans over the same term, subtracts the payments to get the monthly saving, and divides the cost of the points by it. The example gives $4,000 divided by $66.12, which is 61 months.
The net result goes a step further. A lower rate also leaves a slightly smaller balance, and that counts if you sell or refinance. So the net result adds the payments saved and the smaller balance, then subtracts the cost of the points. On the example that turns positive in month 48, a little before the simple break-even. It does not count what you could have earned by investing the money, or any tax effect.
| Leave after | Net result of paying the points |
|---|---|
| 3 years | -$989 |
| 5 years | $1,026 |
| 7 years | $3,039 |
| 10 years | $6,034 |
| 15 years | $10,847 |
| 30 years | $19,803 |
A made-up $400,000 loan over 30 years, 6.75% with no points or 6.5% with 1 point. Net result = payments saved + smaller balance - cost of the points.
What a point buys
The rate cut is not fixed.
A quarter of a percentage point per point is a common rule of thumb, and it is what the example uses. Your lender may offer more or less, so the calculator shows what each point buys from the two quotes you enter. A weak offer makes the break-even longer. Ask for quotes at several point levels, including zero, and run each. The discount points glossary entry has the short version, and are discount points worth it goes through the reasoning.
Mortgage points questions
- How much does a mortgage point cost?
- One point is 1% of the loan amount. On a $400,000 loan that is $4,000. Half a point is $2,000. You pay it at closing, and it is counted as a finance charge in the APR.
- How much does one point lower my rate?
- It varies by lender, loan type and day. A quarter of a percentage point per point is a common rule of thumb, but your quote can be more or less. This calculator shows the cut each point buys from your two quotes, so you can see whether the offer is better or worse than usual.
- How is the break-even point for points calculated?
- Divide what the points cost by the monthly payment they save. At $4,000 and $66.12 a month, that is 61 months. The calculator also shows when the net result turns positive once the smaller balance from the lower rate is counted, which comes a little earlier.
- What happens to the points if I refinance or sell early?
- They are gone. You paid them for a lower rate on that loan, and when the loan ends you get no refund. That is why the number of years you expect to keep it matters more than the rate. If you might refinance in a few years, points rarely pay off.
- Are mortgage points tax deductible?
- Sometimes, but the rules depend on your situation, such as whether the loan buys your main home and whether you itemize. This calculator does not model taxes. Ask a tax professional, and treat any deduction as a bonus rather than a reason to buy points.
- Should I buy points or put the money toward my down payment?
- Compare what each dollar does. Extra down payment can lower the loan below 80% of the value and avoid PMI, which can beat the savings from points. Run the down payment calculator with and without the cash, then run this one with the points, and compare the monthly payments.