Mortgage Points Calculator
See the trade-off between paying discount points up front and shaving your interest rate for years to come. This tool shows how points change your monthly payment and total cost, highlights the break-even timeline, and helps you judge whether buying down the rate makes sense for how long you expect to keep the loan or refinance.
The mortgage points calculator lets you compare lender quotes with and without points, explore “how long should I stay?” scenarios, and weigh short-term cash needs against long-term savings. The goal is clear decision support: pinpoint the month you recover the upfront cost, estimate lifetime interest saved, and choose the option—buy points, skip them, or request a lender credit—that best fits your budget and time horizon.
Compare buying discount points versus taking the base rate. We’ll show your payment change, break-even month, and total savings over your time horizon.
Compare buying mortgage discount points versus taking the base rate. We estimate your payment change, the break-even month, and total savings over your chosen time horizon.
No Points
Buy Points
Results interpretation
How it works
We compute fully amortizing monthly principal & interest payments and cumulative interest through your selected horizon. “Points” are treated as an upfront cost that reduces your APR by a fixed amount per point.
Formulas, assumptions, limitations
Payment formula. M = L·(r) / (1 − (1+r)^−n), with r = APR/12 and n = term months.
Horizon interest. We sum interest month-by-month until the earlier of horizon or term end.
Rate reduction per point. Assumed 0.25% APR reduction for each 1.00 point (varies by lender/market).
Break-even. Upfront points cost divided by monthly savings (if savings > 0).
Total net savings. Interest saved (no points − with points) minus the upfront cost.
Not included. Taxes, insurance, PMI, closing costs other than points, and tax deductibility nuances.
Use cases & examples
If you plan to sell or refinance within ~3 years, a high break-even month may mean points don’t pay off before you exit.
If you’ll keep the loan for 10–15 years and break-even is around 40 months, buying points can yield strong long-run savings.
Even if break-even is far away, lower monthly payments might be valuable for cash-flow management.
Mortgage points FAQ
What are mortgage discount points?
Points are an upfront fee (typically 1% of the loan per point) paid to reduce your interest rate.
How much does one point lower the rate?
It varies; we assume 0.25% APR per 1.00 point for planning purposes.
Are points tax-deductible?
Sometimes; consult a tax professional. Rules differ for purchases vs. refinances and itemization.
Should I buy points with a short horizon?
Usually not, unless break-even occurs before your planned exit or cash-flow relief is the goal.
Does this include taxes/insurance/PMI?
No. We focus on principal & interest and the points trade-off only.
Can lenders offer different rate reductions?
Yes. Always compare official loan estimates to update this assumption.
Should we buy mortgage points? A practical guide
Mortgage points convert a portion of your closing cash into a lower interest rate. The math hinges on how long we keep the loan, how much the rate actually drops per point, and our opportunity cost for the cash. In this guide, we walk through when points tend to help, when they don’t, and how to negotiate smarter with lenders.
1) Understand what you’re buying
A “point” typically costs 1% of the loan amount and reduces your APR by some amount quoted by the lender. The reduction might be 0.125% to 0.375% per point depending on market conditions, loan program, and pricing grids. Our calculator uses a common planning assumption of 0.25% APR per point; you should replace this with the exact figure from your Loan Estimate when you have it.
2) Break-even is necessary but not sufficient
Break-even month tells us when cumulative monthly savings equals the upfront points cost. If we’ll sell or refinance before break-even, points usually don’t make sense. If we’ll keep the loan long after break-even, points can create material savings. Still, break-even ignores other realities like cash on hand, emergency funds, and alternative uses for that money.
3) Horizon and prepayment risk
Few mortgages last the full 30 years. Moves, refinancing, or life changes can end the loan early. We should select a realistic horizon (how long we expect to keep the loan) and run both optimistic and conservative scenarios.
4) Cash trade-offs and liquidity
Money spent on points can’t be used for closing reserves, furnishings, or paying down higher-interest debt. Even when points are positive on paper, keeping cash liquid might be the smarter move depending on your priorities and risk tolerance.
5) Tax considerations
Points may be deductible in the year paid for primary-residence purchases, but refinance points are generally amortized. Because rules change and personal situations vary, we should confirm with a qualified tax professional.
6) Lender shopping and pricing grids
Different lenders quote different buy-down amounts per point. Request Loan Estimates on the same day if possible and compare both the no-points and with-points scenarios. Ask how each additional point moves the rate so you can pinpoint the best trade-off.
7) Sensitivity testing
Try multiple horizons (e.g., 5, 7, 10 years) and different rate-reduction assumptions (e.g., 0.125%–0.375% per point). If points only barely clear break-even, the decision is fragile and may not be worth it.
8) Special cases
- High-cost states and jumbo loans can change pricing dynamics.
- Adjustable-rate mortgages (ARMs) may price points differently than fixed loans.
- Builder or seller credits sometimes can fund points—confirm applicable limits.
- If you plan large extra payments, the amortization path changes slightly; monthly savings may shrink faster.
9) A simple decision framework
- Confirm the lender’s exact rate reduction per point.
- Pick a realistic horizon and a conservative alternative.
- Check break-even vs. your horizon.
- Assess liquidity needs and opportunity cost.
- Decide if the long-run savings and lower payment are worth the upfront cash.
10) What we do next
Use this calculator to narrow your options, then compare against real quotes. If a quote materially differs from our assumed rate-reduction per point, update the assumption and re-evaluate. Smart shopping and realistic horizons drive the best decision.