Mortgage Points Calculator

Mortgage discount points are upfront fees paid at closing to reduce the interest rate on your loan. One point equals 1% of the loan amount. Paying points is often called 'buying down the rate.' On a $400,000 mortgage, 1 point costs $4,000 and typically reduces the rate by 0.125% to 0.25%. The total savings from the lower rate over the loan life can substantially exceed the upfront cost if you keep the loan long enough.

Calculate the break-even period: Break-Even Months = Upfront Points Cost ÷ Monthly Savings. If you pay $4,000 for 1 point and save $55/month, break-even is $4,000 ÷ $55 = 72.7 months (about 6 years). If you plan to stay in the home more than 6 years, points are mathematically worth it. If you might sell or refinance before 6 years, the upfront cost exceeds the savings and points are not worth it.

Typically 0.125% to 0.25% per point, depending on the lender, loan type, and market conditions. There is no universal standard. Lenders set their own point-to-rate relationships. Always ask for the exact rate reduction per point in writing before closing. The value of a point also varies by loan amount: the same rate reduction saves more on a $600,000 loan than a $200,000 loan.

The break-even period is the number of months you must keep the mortgage before the cumulative monthly savings exceed the upfront points cost. Formula: Break-Even Months = Points Cost ÷ Monthly Savings. Example: 1 point on $350,000 = $3,500. At 7% vs 6.75% (0.25% reduction) on 30 years, the monthly savings is about $58. Break-even = $3,500 ÷ $58 = 60 months (5 years). After 60 months, every subsequent month is net profit.

It depends on your break-even tolerance. Most financial advisors suggest: (1) Calculate break-even for each point increment your lender offers. (2) Only buy points where break-even is comfortably shorter than your expected time in the home. (3) Never buy points with funds that would otherwise reduce your down payment below 20% — PMI savings typically outweigh point savings at that threshold. (4) Consider buying 1–2 points if you expect to stay 7+ years; skip or minimize points for shorter horizons.

Yes, for primary home purchases, points paid are generally fully deductible in the year paid as home mortgage interest (IRS Publication 936). For refinances, points are typically amortized and deducted ratably over the loan term. Points on second homes or investment properties follow different rules. The deductibility effectively reduces the real cost of points by your marginal tax rate, which shortens the break-even period. Consult a tax professional for your specific situation.

Discount points reduce your interest rate — you pay upfront to lower the ongoing rate. Origination points (or origination fees) are lender processing fees for creating the loan — they do not reduce your rate. When comparing loans, always distinguish between the two. A loan with 0 origination points and 1 discount point is very different from one with 1 origination point and 0 discount points. Look at the Loan Estimate (LE) Section A for origination charges and Section B for discount points.

Generally, a larger down payment wins if it moves you below an important threshold: 20% (eliminates PMI), 25% (better rate tiers), or reduces the loan to a conforming limit. PMI costs 0.5–1.5% per year — eliminating it by increasing down payment typically has a faster effective break-even than buying points. Once you are at 20% or above with no PMI, the decision between points and larger down payment is closer, and the break-even math should drive the choice.

Lifetime Savings = (Monthly Savings × Total Months) − Upfront Points Cost. For a 30-year mortgage (360 months) with $55/month savings and $4,000 points cost: $55 × 360 − $4,000 = $19,800 − $4,000 = $15,800 net lifetime savings. Important caveat: most homeowners sell or refinance before the full term, so effective savings equal (monthly savings × actual months held) − upfront cost. This calculator shows the full-term figure.

Refinancing resets the clock. If you bought points to lower your rate to 6.5% and then refinance when rates drop to 5.5%, the break-even for the original points never completes — the upfront cost is unrecovered. The only scenario where points pay off despite a refinance is if the refinance happens after break-even. Points are most valuable when you have high confidence you will keep the original loan for at least the break-even period.

Yes. The rate-to-point relationship is lender-set and negotiable, especially in a competitive mortgage market. Shopping multiple lenders often reveals that one lender offers the same rate buydown for fewer points. A mortgage broker may access lenders with better point pricing than what major retail banks offer. When comparing Loan Estimates, compare both the rate and the points cost together — a 6.5% rate with 1 point from Lender A may cost the same as 6.625% with 0 points from Lender B, depending on your loan term.

A no-cost mortgage is a loan where the lender covers closing costs (origination, title, appraisal) by charging a slightly higher interest rate — the inverse of discount points. Instead of paying points to lower the rate, you accept a higher rate to eliminate upfront costs. No-cost loans are beneficial when you plan to sell or refinance within a few years, since the higher rate's cost over that short period is less than the closing costs you would have paid. Points and no-cost loans sit at opposite ends of the same rate-vs-upfront-cost spectrum.