Mortgage Points Calculator for Rate Savings and Break-Even
Evaluate mortgage discount points by comparing upfront cost, the new rate, monthly savings, and months to break even.
Enter loan amount, current rate, points, term, cost per point, and rate reduction per point to see whether buying points pays off.
Mortgage Points Calculator for Rate Savings and Break-Even
Evaluate mortgage discount points by comparing upfront cost, the new rate, monthly savings, and months to break even.
About the Mortgage Points Calculator
The mortgage points calculator tests whether paying discount points to lower a note rate is worth the cash due at closing. One point is usually 1% of the loan amount in exchange for a rate reduction, often about 0.25% per point, though lender pricing varies. Enter the loan amount (principal), the quoted rate before points, how many points to buy, the term, the cost of each point as a percent of principal, and the rate reduction per point. The headline result is months to break even.
Points cost = principal × points × (cost per point / 100). If cost per point is 1, one point on a $300,000 loan costs $3,000. The new rate is the quoted rate minus points times the reduction per point. Monthly savings is the difference between the original amortized payment and the payment at the new rate, using the standard mortgage formula. Break-even months equal points cost divided by monthly savings. If you keep the loan longer than that, buying points is ahead on a simple cash-flow basis; if you sell or refinance sooner, you may not recoup the fee.
Use the mortgage points calculator when a lender offers a rate menu with 0, 1, or 2 points, when comparing a credit-union price with a retail quote, and when a cash-to-close constraint makes points painful even if the break-even looks short. The model does not discount future savings, does not tax-adjust the point deduction, and does not include origination fees that are not points. A 0.25% reduction per point is a planning default, not a market guarantee.
If monthly savings is zero or negative—because the reduction is zero—the break-even is undefined or infinite and should be treated as “do not buy points.” Recalculate with the lender’s actual price sheet, and compare break-even months with how long you realistically expect to keep the mortgage. The result is a planning estimate, not a lock confirmation.
Mortgage Points Calculator Examples
These worked examples use the same cost, payment-savings, and break-even formulas as the mortgage points calculator.
| Inputs | Result | Why it matters |
|---|---|---|
| $300,000 loan, 6.5% rate, 1 point, 30 years, 1% cost/point, 0.25% reduction/point | Cost $3,000.00; new rate 6.25%; save $49.05/month; break-even 61.2 months | You need a bit more than five years in the loan to recoup a single discount point. |
| $400,000 loan, 7% rate, 2 points, 30 years, 1% cost/point, 0.25% reduction/point | Cost $8,000.00; new rate 6.50%; save $132.94/month; break-even 60.2 months | Two points cost more cash but the larger monthly savings keeps break-even near five years. |
| $250,000 loan, 6% rate, 1 point, 15 years, 1% cost/point, 0.25% reduction/point | Cost $2,500.00; new rate 5.75%; save $33.62/month; break-even 74.4 months | On a 15-year loan the monthly savings is smaller, so break-even stretches past six years. |
How to Use the Mortgage Points Calculator
- Enter the loan principal and the interest rate quoted with zero points.
- Enter how many points to buy, the term, cost per point as a percent, and the rate reduction per point.
- Select Calculate to view points cost, the new rate, monthly savings, and months to break even.
- Compare break-even months with how long you expect to keep the mortgage before selling or refinancing.
Mortgage Points Calculator FAQ
What is a mortgage discount point?
A discount point is an upfront fee, typically 1% of the loan amount per point, paid to lower the note rate. Lender menus state how much rate each point buys on that day’s price sheet.
How is break-even calculated?
Break-even months equal the cash cost of the points divided by the reduction in the monthly principal-and-interest payment. Taxes, insurance, and PMI are not part of that savings figure.
Should I buy points if I might refinance?
Only if you still expect to hold the loan past break-even. A refinance or sale before that date can leave the points unrecovered.
Is cost per point always 1%?
Often yes, but not always. Some quotes sell fractions of a point or bundle origination with discount points. Enter the percent of principal you will actually pay per point.
Does the mortgage points calculator include tax deductions?
No. Points on a purchase may be deductible in some cases, which would shorten an after-tax break-even. Confirm treatment with a tax professional rather than assuming a deduction.