Mortgage Points Calculator

Determine if buying mortgage discount points is worth it. See how much you'll save monthly, how long it takes to break even, and total savings over time.

Points Details

$
%
%

Typically 0.25%

1 point = 1% of loan amount

yrs
yrs

Used to calculate total savings

Ready to Calculate

Enter your loan details and points information to see if buying points makes financial sense.

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Pro Tip

The breakeven point is your most important metric. If you plan to move, sell, or refinance before reaching breakeven, buying points will cost you money rather than save it.

Check Refinance Options →

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Understanding Mortgage Discount Points

Mortgage discount points are a form of prepaid interest that allows borrowers to "buy down" their interest rate. Each point costs 1% of the loan amount and typically reduces the interest rate by approximately 0.25 percentage points, though the exact reduction varies by lender and market conditions.

The decision to buy points is essentially a trade-off between spending money upfront versus saving money over time through lower monthly payments. The breakeven point tells you exactly how many months of lower payments it takes to recover the upfront cost.

For borrowers who plan to stay in their home for many years, buying points can result in substantial savings. On a $300,000 loan, buying 2 points at a cost of $6,000 might reduce your rate from 7% to 6.5%, saving about $100 per month. Over 30 years, that is $36,000 in savings minus the $6,000 cost, yielding $30,000 in net savings.

Conversely, if you plan to sell or refinance within a few years, buying points is likely a poor investment because you won't have enough time to recoup the upfront cost through monthly savings. Always calculate the breakeven point before deciding.

Points Formula

Breakeven Calculation

Breakeven Months = Cost of Points ÷ Monthly Savings

Where:

Cost of Points = Points purchased x 1% x Loan Amount

Monthly Savings = Original payment - Reduced payment

Rate Reduction = Points purchased x reduction per point

Example

For a $300,000 loan, 2 points at 0.25% reduction each:

  • • Cost: 2 x 1% x $300,000 = $6,000
  • • Rate reduction: 2 x 0.25% = 0.50% (7.0% to 6.5%)
  • • Payment at 7.0%: $1,995.91/mo
  • • Payment at 6.5%: $1,896.20/mo
  • • Monthly savings: $99.71
  • • Breakeven: $6,000 / $99.71 = ~61 months (5.1 years)

Frequently Asked Questions

What are mortgage points?
Mortgage points (also called discount points) are upfront fees paid to the lender at closing in exchange for a lower interest rate. One point equals 1% of the loan amount and typically reduces the rate by about 0.25%, though this varies by lender.
How many points should I buy?
The right number of points depends on how long you plan to stay in the home. More points mean more upfront cost but greater long-term savings. Use the breakeven calculation to determine if you'll stay long enough to recoup the cost.
Are mortgage points tax deductible?
Mortgage discount points may be tax deductible as prepaid interest. Points paid on a purchase mortgage can often be deducted in the year paid. Refinance points must usually be deducted over the life of the loan. Consult a tax advisor for your specific situation.
Is it better to buy points or make a larger down payment?
If you already have a 20% down payment (avoiding PMI), buying points may be beneficial if you're staying long-term. If your down payment is less than 20%, putting more money down to eliminate PMI may save more than buying points.
What's the difference between discount points and origination points?
Discount points reduce your interest rate and are optional. Origination points are lender fees for processing the loan and don't reduce your rate. This calculator deals with discount points only.