Mortgage Points Calculator
See whether buying mortgage discount points pays off. Compare payments with and without points, and find your break-even point and net savings.
Results
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Quick Answer
Each mortgage point costs 1% of the loan amount and lowers your rate. Break-even is the cost of the points divided by the monthly saving. On a $300,000, 30-year loan, 1 point costs $3,000. If it cuts the rate from 6.75% to 6.5%, the payment falls by $49.59 a month, so you break even after about 61 months.
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Table of Contents
- Mortgage Points Calculator
- Quick Answer
- Related Calculators
- How This Mortgage Points Calculator Works
- How to Use the Mortgage Points Calculator
- Core Formulas
- Key Terms
- Worked Example
- Real-Life Examples
- Discount Points vs Origination Points
- Cost of Points by Loan Amount
- When Buying Points Makes Sense
- Points vs Lender Credits
- Common Mistakes to Avoid
- Frequently Asked Questions
- References & Sources
How This Mortgage Points Calculator Works
Enter your loan amount, the rate you would get with no points, the lower rate the lender offers if you buy points, and how many points that costs. Choose the loan term and how long you expect to keep the loan before you sell or refinance.
The calculator works out both monthly payments, the monthly saving and the upfront cost of the points. It then shows how many months it takes for the savings to cover the cost, and whether you come out ahead in the time you plan to keep the loan.
Quick explanation: points are prepaid interest. You pay more now to pay less each month.
- One point: 1% of the loan amount.
- Break-even: cost of points ÷ monthly saving.
- Rule of thumb: points make sense only if you keep the loan past break-even.
How to Use the Mortgage Points Calculator
- Enter the loan amount.
- Enter the rate without points and the lower rate with points.
- Enter how many points that lower rate costs.
- Choose the loan term and how many years you will keep the loan.
- Press Calculate and check the break-even and net saving.
Core Formulas
- Cost of points: loan amount × points ÷ 100
- Monthly payment: L × r ÷ (1 − (1 + r)^−n)
- Monthly saving: payment without points − payment with points
- Break-even months: cost of points ÷ monthly saving
- Net saving: monthly saving × months kept − cost of points
r is the monthly rate (annual rate ÷ 12) and n is the number of monthly payments.
Key Terms
- Discount point: an upfront fee of 1% of the loan that lowers the interest rate.
- Break-even: the month when your total savings equal the cost of the points.
- Lender credit: money from the lender toward closing costs, in exchange for a higher rate.
- Loan Estimate: the standard form showing a mortgage’s rate, points and costs.
- Prepaid interest: interest you pay upfront, as with points.
Worked Example
You borrow $400,000 for 30 years. The lender offers 7.0% with no points or 6.5% with 2 points. You expect to move in 5 years.
- Cost of points = 2% × $400,000 = $8,000.00
- Payments: $2,661.21 without points, $2,528.27 with points
- Monthly saving = $132.94, so break-even is about 61 months
- After 5 years you have saved $7,976.27 but paid $8,000.00, so you are $23.73 behind
Real-Life Examples
- A long stay: 1 point on $300,000 saves $49.59 a month and nets $2,950.83 over 10 years.
- A short stay: 2 points on $400,000 kept 5 years leaves you $23.73 behind.
- Comparing offers: check which lender’s points give the biggest rate cut per point.
- Refinancing: points on a refinance follow the same break-even maths.
Discount Points vs Origination Points
- Discount points: optional, and they lower your interest rate.
- Origination points: a lender fee for processing the loan that does not lower the rate.
- Check the Loan Estimate: it lists points and fees separately.
Cost of Points by Loan Amount
| Loan amount | 0.5 point | 1 point | 2 points |
|---|---|---|---|
| $150,000 | $750 | $1,500 | $3,000 |
| $200,000 | $1,000 | $2,000 | $4,000 |
| $300,000 | $1,500 | $3,000 | $6,000 |
| $400,000 | $2,000 | $4,000 | $8,000 |
| $500,000 | $2,500 | $5,000 | $10,000 |
| $750,000 | $3,750 | $7,500 | $15,000 |
When Buying Points Makes Sense
- You will stay a long time: the longer you keep the loan, the more the monthly saving adds up.
- You have spare cash: points use money you could put toward a bigger down payment or keep as savings.
- Rates are unlikely to fall: if you refinance soon, the points are lost.
- The rate cut is worth it: compare offers, because how much one point lowers the rate differs between lenders.
Points vs Lender Credits
Points and lender credits are two sides of the same trade. With points, you pay more at closing for a lower rate. With lender credits, the lender pays part of your closing costs, and you accept a higher rate in return. Both show up on your Loan Estimate.
If you are short of cash at closing or expect to move or refinance soon, credits can be the better deal. If you plan to stay for many years and have the cash, points can save more. Run both options through this calculator: for credits, treat the credit as a negative cost and the higher rate as the rate with points.
Common Mistakes to Avoid
- Buying points and then refinancing early. You lose the unrecovered cost.
- Ignoring break-even. Check it against how long you will really keep the loan.
- Comparing different loans. Use the same loan amount and term for both rates.
- Draining your savings. Keep an emergency fund instead of buying points with it.
- Confusing points with fees. Origination points do not lower the rate.
Frequently Asked Questions
One point equals 1% of the loan amount. On a $300,000 loan, one point costs $3,000.
Divide the cost of the points by the monthly saving to get the number of months.
It depends on the lender and the market. Ask lenders for quotes with and without points.
They pay off if you keep the loan longer than the break-even period.
Often yes. Many lenders offer fractions such as 0.25 or 0.5 points.
Sometimes. IRS rules decide when points can be deducted, so ask a tax professional.
Yes. The same break-even maths applies.
The opposite of points: the lender pays some closing costs and you take a higher rate.
Compare both. A bigger down payment lowers the loan and may remove PMI.
You lose money on the points compared with not buying them.
No. It uses simple break-even, as most lenders and the CFPB describe.
On page 2 of the Loan Estimate, under origination charges.
References & Sources
| Source | Used For | Link |
|---|---|---|
| Consumer Financial Protection Bureau, What are discount points and lender credits? | One point equals one percent of the loan amount. | https://www.consumerfinance.gov/ask-cfpb/what-are-discount-points-and-lender-credits-and-how-do-they-work-en-136/ |
| Consumer Financial Protection Bureau, Trends in discount points | Break-even estimated as the cost of points divided by monthly savings. | https://www.consumerfinance.gov/data-research/research-reports/data-spotlight-trends-in-discount-points-amid-rising-interest-rates/ |