Mortgage Points Calculator
See how buying discount points (or taking lender credits) changes your rate and payment, how long it takes to break even, your net savings over the years you keep the loan, the APR, and a side-by-side table for 0 to 3 points.
How it works
Cost = loan × points% · New rate = base rate − points × cut per point (or the quoted rate) · Payment M = P × r ÷ (1 − (1 + r)^−n) · Break-even months = cost ÷ monthly saving · Net saving after k months = saving × k + (balance without points − balance with points) − cost
Discount points are prepaid interest: you pay the lender cash at closing, one point being 1% of the loan, in exchange for a lower rate. Both payments use the standard amortization formula, and the simple break-even divides the cost of the points by the monthly saving. Stay past that month and the points are a net saving; sell or refinance before it and you lose money. The net saving after the years you expect to keep the loan is the figure to decide on. It adds up the payment savings and the extra principal you have paid down at the lower rate, then subtracts the cost. The calculator also runs both loans month by month and reports a second break-even that counts that faster pay-down of principal. It also accounts for adding the points to the loan, or for the return the cash could have earned elsewhere, if you choose those options. Lender credits are the reverse: enter negative points to see how long the cash you receive lasts against a higher payment. The table at the end compares 0 to 3 points at the same rate cut, so you can see where the trade-off peaks for your time horizon.
Worked example
On a $320,000 loan at 7.40% for 30 years the payment is $2,215.62. Buying 2 points costs $6,400 and, at 0.25% per point, cuts the rate to 6.90%, lowering the payment to $2,107.52, a $108.09 monthly saving. Break-even is 6,400 ÷ 108.09 = 59.2, so the payment savings repay the points in month 60, about 5 years in. Counting the extra principal paid down at the lower rate, you are ahead after 48 months. If you keep the loan 10 years you come out about $9,750 ahead ($12,971 of payment savings plus $3,179 of extra principal paid down, minus the $6,400 cost), and over the full 30 years about $32,514 ahead.
Sources: CFPB — What are discount points and lender credits? · IRS — Topic 504, Home mortgage points · Freddie Mac — Primary Mortgage Market Survey
Frequently asked questions
What is a mortgage point worth?
One discount point costs 1% of the loan amount and often lowers the rate by around 0.25 percentage points, though the exact cut varies by lender, loan type and market. Ask for quotes with and without points and enter the quoted rate with the Lender quote option.
When is buying points worth it?
When you will keep the loan well past the break-even month. The net saving after the years you expect to stay is the number to decide on. If you might move or refinance within a few years, or the market looks set for lower rates, keeping the cash is usually safer.
What are lender credits?
The reverse of points: the lender gives you cash toward closing costs and you take a higher rate. The CFPB describes them as negative points. Enter a negative number of points; the break-even then shows how many months the credit lasts against the higher payment. Credits suit people who expect to leave the loan early.
Should I pay the points in cash or add them to the loan?
Adding them to the loan avoids the upfront cash, but you pay interest on the points for the life of the loan, so the break-even takes longer. Turn on “Add the cost of the points to the loan” under More options to compare.
Are discount points tax-deductible?
In the US, points paid to buy or build your main home can often be deducted as mortgage interest in the year you pay them, if you itemize and meet the IRS conditions. Points on a refinance or a second home are generally deducted evenly over the loan term. See IRS Topic 504 or ask a tax professional; tax savings are not included in the results.
Is a point the same as an origination fee?
No. An origination fee pays the lender for making the loan and does not lower the rate. Discount points are prepaid interest that buy a lower rate. Check the Loan Estimate to see which is which.
Related calculators
Educational estimate, not financial or real-estate advice. Actual costs, rates and returns vary by lender, market and property.