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Mortgage Points Calculator
Use this free mortgage points calculator to decide whether buying down your mortgage rate is worth it. Enter your loan amount, base rate, the number of discount points, how much each point cuts your rate, and the loan term, and it shows your monthly payment with and without points, the monthly saving, the upfront cost, the break-even point in months, and the total interest saved over the life of the loan.
One point costs 1% of the loan amount, paid upfront at closing.
Default 0.25% per point. Ask your lender for the exact figure — it varies.
| Monthly payment without points (7.00%) | |
| Monthly payment with points (6.75%) | |
| Monthly savings | |
| Upfront cost of points | |
| Break-even point | |
| Total interest saved (after points cost) |
How it works
Mortgage discount points let you buy a lower interest rate by paying money upfront at closing. One point costs 1% of the loan amount, and in exchange the lender cuts your rate — often by about 0.25% per point, though the exact reduction varies by lender and by market conditions. The question is always the same: will you stay in the home long enough for the monthly savings to pay back the upfront cost?
The monthly payment formula is the standard amortization formula, where P is the loan amount, r is the monthly interest rate (annual rate divided by 12), and n is the number of monthly payments. The calculator works it out twice: once at your base rate, and once at the reduced rate after points. The difference between the two payments is your monthly saving, and dividing the upfront points cost by that saving gives the break-even point in months.
The break-even point is the decision. If you sell or refinance before break-even, the points cost you money — you paid upfront and did not keep the loan long enough to earn it back. If you stay past break-even, every month after that is pure saving, and the longer you stay, the more the points are worth. On a 30-year loan the total interest saved can run into tens of thousands of dollars, but only if you actually keep the loan for most of its term.
A few things to keep in mind. Points are paid at closing, on top of your down payment and other closing costs, so they tie up cash you might need for moving, furniture, or repairs. Points on a primary residence are often tax-deductible in the year you pay them, which can shorten the effective break-even point, but tax rules change and depend on your situation — this calculator does not include any tax effect. Also, the rate reduction per point is not fixed by law: a lender might offer 0.25% per point on one day and 0.20% the next, so always ask for the exact figure and compare lenders on the same basis.
As a rule of thumb, points make sense when you plan to stay in the home well past break-even and you have cash to spare at closing. They rarely make sense if you expect to move or refinance within a few years. Run the numbers with your real loan amount, rate, and lender's per-point reduction before you decide.
Worked example
A buyer takes a $400,000 loan for 30 years at a base rate of 7.00% and considers paying 1 point, with each point cutting the rate by 0.25%.
Step 1: Points cost — 1% × $400,000 = $4,000 upfront.
Step 2: New rate — 7.00% − 0.25% = 6.75%.
Step 3: Monthly payment without points — $400,000 × 0.005833 × (1.005833)360 ÷ ((1.005833)360 − 1) = $2,661.21.
Step 4: Monthly payment with points — the same formula at 6.75% gives $2,594.39.
Step 5: Monthly savings — $2,661.21 − $2,594.39 = $66.82.
Step 6: Break-even — $4,000 ÷ $66.82 = 59.9 months, about 5 years.
Step 7: Total interest saved — interest without points is $558,035.59 and with points $533,981.26, a gross saving of $24,054.33; minus the $4,000 points cost, the net saving is $20,054.33.
Paying the point is worth it if the buyer stays in the home for more than 60 months, saving $66.82 a month and $20,054.33 in interest over the full term. Enter $400,000, 7%, 1 point, 0.25% reduction, and 30 years in the calculator above and you will get exactly the same result.
FAQ
What is a mortgage point?
One mortgage discount point costs 1% of the loan amount, paid upfront at closing, in exchange for a lower interest rate. On a $400,000 loan, one point costs $4,000. It is different from an origination fee, which is a lender charge that does not lower your rate.
How much does one point lower my rate?
Usually about 0.25% per point, which is the default in this calculator, but the exact reduction varies by lender, loan type, and market conditions. Always ask your lender for their per-point reduction before comparing offers.
When is it worth paying for mortgage points?
When you will keep the loan well past the break-even point. If break-even is 60 months and you plan to stay 10 years, points usually pay off. If you might move or refinance within a few years, the upfront cost is unlikely to be recovered.
Are mortgage points tax deductible?
Points paid on a loan for your primary residence are often deductible in the year you pay them, subject to current tax rules and limits. Points on a refinance are usually spread over the life of the loan. Check the current rules or ask a tax professional — this calculator does not include any tax effect.
What happens if I refinance after paying points?
You lose the unrecovered part of the points cost. Refinancing replaces the loan, so the lower rate you paid for ends with the old loan. That is why a short expected stay makes points a poor choice.