How this calculator works
Each point costs 1% of the loan and lowers the rate by the amount you enter. The calculator compares the monthly payment with and without points; the cost of the points divided by the monthly savings is the break-even time. Net savings subtract the cost from the savings over the years you expect to keep the loan.
Worked example
With the example values below: Break-even point, 5 yrs 1 mo (saves $58.86 a month). Change any number above to run your own.
What you enter
| Input | Example |
|---|---|
| Loan amount | $360,000 |
| Rate without points | 6.5% |
| Points to buy1 point = 1% of the loan | 1 |
| Rate cut per point | 0.25% |
| Loan term | 30 years |
| Years you expect to keep the loan | 7 yrs |
What mortgage points are
Discount points are an upfront fee you pay the lender to lower your interest rate. One point costs 1% of the loan amount. How much each point lowers the rate varies by lender and market, but a common range is about 0.125 to 0.25 percentage points per point.
Points are different from origination points, which are a fee for making the loan and don't lower the rate. Your Loan Estimate lists both separately.
How to work out the break-even point
Divide the cost of the points by the monthly payment savings. That's how many months you need to keep the loan before buying points pays off. If two points cost $7,000 on a $350,000 loan and save $110 a month, the break-even is about 64 months, a little over five years.
If you'll sell or refinance before then, you'll lose money on the points. If you'll keep the loan much longer, the savings keep adding up; the calculator shows net savings over the years you expect to keep it.
When buying points makes sense
When you're short on cash, putting the same money toward a larger down payment can be better, especially if it gets you to 20% and removes PMI. Some lenders also offer negative points, called lender credits, which raise your rate in exchange for lower closing costs.
- You expect to stay in the home and keep the loan well beyond the break-even.
- You have cash left after your down payment, closing costs and emergency fund.
- Rates are unlikely to fall enough to make refinancing attractive soon.
- The seller is offering credits you can put toward points.
Taxes on points
Points paid on a mortgage to buy your main home are generally deductible as mortgage interest in the year you pay them if you itemize. Points on a refinance are usually deducted gradually over the life of the loan. Since most households now take the standard deduction, don't count on a tax benefit unless you itemize.
Frequently asked questions
How much does one mortgage point cost?
1% of the loan amount. On a $400,000 loan, one point costs $4,000.
How much does a point lower your rate?
It varies by lender and market, but typically about 0.125 to 0.25 percentage points per point. Compare Loan Estimates with and without points to see the actual trade-off.
Are mortgage points worth it?
They're worth it if you keep the loan longer than the break-even period, the cost of the points divided by the monthly savings. If you might sell or refinance within a few years, they usually aren't.
Are mortgage points tax-deductible?
Points on a mortgage to buy your main home are generally deductible in the year paid if you itemize. Points on a refinance are usually deducted over the loan term.
Should I buy points or make a bigger down payment?
If a bigger down payment would get you to 20% and remove PMI, that's usually the better use of cash. Otherwise, compare the break-even on points with how long you'll keep the loan.
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Estimates for planning only, not financial, tax or legal advice. Tax tools use 2026 federal figures (brackets, $16,100 / $32,200 standard deduction, $19,000 gift exclusion, $15M lifetime exemption). Rates shown as defaults are examples; replace them with quotes you actually receive.