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Mortgage Points Calculator

See whether buying mortgage discount points is worth it: the upfront cost, your lower monthly payment, the break-even month, and your net savings.

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years
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Xfin

Break-even

61 months

Upfront cost of points
$8,000.00
Monthly savings
$131.52
Bought-down rate
6.25%
Net savings over your holding period
$3,047.68
Net savings if kept to term
$39,347.20
What this means
You break even before you expect to sell or refinance, so the points pay off over your holding period
Cumulative net position

Quick answer: With the example inputs this page loads by default, the headline result (Break-even) comes to 61 months. See whether buying mortgage discount points is worth it: the upfront cost, your lower monthly payment, the break-even month, and your net savings. Change any input above and every figure updates instantly in your browser.

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Mortgage points are an upfront fee you pay at closing to lower your interest rate, where one point costs 1 percent of the loan. They are worth it only if you keep the loan long enough for the monthly savings to cover that cost. The break-even month is the upfront cost divided by the monthly saving. If you sell or refinance before then, the points lose money. This calculator finds your break-even and net savings.

What this result means

The headline is your break-even month: how long it takes for the lower payment to pay back what the points cost upfront. Compare that to how long you actually expect to keep this loan. If you break even well before you plan to sell or refinance, the points pay off, and the net savings figure shows how much you come out ahead over your holding period. If your break-even lands after you expect to leave, the points lose money, because you paid the cost upfront but gave up the loan before the savings caught up. The most common mistake is buying points and then refinancing or moving a few years later, so be honest about how long you will really hold the loan. Note this models permanent discount points that lower the rate for the whole term, not a temporary 2-1 buydown. This is an estimate for education, not a loan offer or financial advice.

Assumptions

  • One point costs 1 percent of the loan amount, so the upfront cost is the loan times the number of points as a percent. Points are paid at closing.
  • The rate reduction you enter is the total rate drop the points buy, not a per-point figure. The bought-down rate is the base rate minus that reduction, floored at 0 since a rate cannot go below zero.
  • Both payments are principal and interest only, from the shared amortization engine (fixed rate, interest charged monthly on the balance, each payment at month end). The monthly savings is the base payment minus the bought-down payment.
  • The break-even is discrete: the first whole month at which the cumulative monthly savings reach the upfront cost, which is the cost divided by the monthly savings, rounded up. If the points do not lower the payment (no rate reduction), there is no break-even and the result says so rather than dividing by zero.
  • Net savings over your holding period is the monthly savings times the number of months you expect to keep the loan, minus the upfront cost. The months are capped at the loan term, since the savings stop once the loan is paid off. Net savings to term uses the full term instead.
  • This models permanent discount points that lower the rate for the entire loan. It does not model a temporary buydown such as a 2-1 buydown, where the rate is reduced only for the first year or two and then steps up.
  • Not modeled: the time value of money beyond the simple break-even count, the tax deductibility of points, lender caps on points, and any rate-and-term differences between quotes beyond the reduction you enter. Figures are in nominal dollars.
  • This is an estimate for educational purposes only, not financial, legal, or tax advice, and not a loan offer. Your lender's points pricing and rate reduction will differ. Consult a qualified professional and your lender for numbers specific to your situation.

Key terms

Definitions for the terms this calculator uses, in our finance glossary .

How the points break-even is calculated

Mortgage discount points are an upfront fee paid at closing to lower your interest rate. The whole question is whether the lower payment saves you more than the points cost before you sell or refinance. This calculator answers it with a break-even month.

The upfront cost

One point costs 1 percent of the loan amount, so the cost is the loan times the number of points:

points cost = loan amount x points%

Two points on a 400,000 dollar loan cost 8,000 dollars.

The two payments and the monthly saving

The rate reduction you enter is the total rate drop the points buy (not a per-point figure). The bought-down rate is the base rate minus that reduction, floored at 0. Both payments come from the same amortization engine the mortgage and refinance calculators use:

base payment = amortize(loan, base rate, term)

bought-down payment = amortize(loan, base rate - rate reduction, term)

monthly savings = base payment - bought-down payment

The break-even month

The break-even is discrete: the first whole month at which the cumulative monthly savings reach the upfront cost. That is the cost divided by the monthly saving, rounded up:

break-even month = ceil(points cost / monthly savings)

If the points do not lower the payment (no rate reduction), the monthly savings are 0, there is no break-even, and the result says so rather than dividing by zero.

Net savings

Points pay off only if you keep the loan past the break-even, so the decision figure is your net savings over how long you actually expect to hold the loan:

net savings over holding period = monthly savings x months held - points cost

The months held are capped at the loan term, because the savings stop once the loan is paid off. The net savings to term uses the full term instead.

Conventions

  • One point equals 1 percent of the loan. This is the standard discount-point convention (CFPB).
  • The rate reduction is total, not per point. Enter the whole rate drop the points buy, so 2 points that lower the rate by half a percent is a 0.5 percent reduction here.
  • The break-even is a whole month, rounded up, since you only realize a full month’s saving at each payment.

Permanent points vs a temporary 2-1 buydown

This calculator models permanent discount points, which lower the rate for the entire loan. It does not model a temporary 2-1 buydown, where the rate is cut by two percent in the first year and one percent in the second, then returns to the full note rate. A temporary buydown is a short-term affordability tool, often seller-paid; permanent points are a long-term rate reduction you buy. The break-even logic here applies to permanent points.

Worked example

Using the defaults: a 400,000 dollar loan, a 6.75 percent base rate over 30 years, 2 points that buy a total 0.5 percent rate reduction, and an expected holding period of 7 years.

  • points cost = 400,000 x 2% = 8,000
  • base payment = principal and interest on 400,000 at 6.75% over 30 years = 2,594.39
  • bought-down payment = principal and interest on 400,000 at 6.25% over 30 years = 2,462.87
  • monthly savings = 2,594.39 - 2,462.87 = 131.52
  • break-even month = ceil(8,000 / 131.52) = 61 (about 5 years)
  • net savings over 7 years = 131.52 x 84 - 8,000 = 3,047.68
  • net savings to term = 131.52 x 360 - 8,000 = 39,347.20

Because the break-even (month 61, about 5 years) comes before the 7-year holding period, the points pay off: you come out about 3,048 dollars ahead over those 7 years. If you expected to move in 4 years, you would sell before breaking even and the points would lose money.

What this includes and excludes

It includes the upfront cost, both payments, the monthly saving, the discrete break-even month, and net savings over your holding period and to term. It excludes the time value of money beyond the simple break-even count, the tax deductibility of points, lender caps on points, and temporary buydowns. This is an estimate for education, not a loan offer or financial, legal, or tax advice.

Sources

  • Consumer Financial Protection Bureau, “What are (discount) points and lender credits and how do they work?” consumerfinance.gov.
  • Consumer Financial Protection Bureau, guidance on comparing mortgage offers and paying for points, consumerfinance.gov.

Frequently asked questions

Are mortgage points worth it?
Points are worth it when you keep the loan past the break-even month. You pay the cost upfront and save a fixed amount each month, so the longer you hold the loan, the more you gain. If you expect to sell or refinance before the break-even, you would not recoup the cost and the points lose money.
How do I calculate the break-even on points?
Divide the upfront cost of the points by the monthly savings, then round up to the next whole month. For example, 8,000 dollars of points that save 131.52 dollars a month break even at month 61, about five years. Keep the loan longer than that and the points come out ahead.
What is a mortgage point?
A discount point is an optional fee paid to the lender at closing to lower your interest rate. One point costs 1 percent of the loan amount, so on a 400,000 dollar loan one point is 4,000 dollars. Each point typically lowers the rate by a small fraction of a percent, which this calculator captures through the total rate reduction you enter.
Is a 2-1 buydown the same as points?
No. This calculator models permanent discount points, which lower the rate for the entire loan. A 2-1 buydown is a temporary reduction: the rate is cut by two percent in year one and one percent in year two, then returns to the full rate. A temporary buydown is usually a short-term affordability tool, while points are a long-term rate reduction.
What does my result mean?
The break-even month tells you how long it takes the monthly savings to repay the points. Compare it to how long you expect to keep the loan: if you break even first, the points pay off and the net savings figure shows your gain; if not, they cost more than they save over your holding period.

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By Sam Sage Last reviewed .