Mortgage Points Break-Even Calculator

Compare a loan with and without discount points to see how many months it takes for the lower payment to repay the upfront cost.

Mortgage Points Break-Even Calculator

Live

Loan amount ($)

Loan term (years)

Rate WITHOUT points (%)

Rate WITH points (%)

Points purchased (1 point = 1% of loan)

Payment without points	$2,528.27/mo
Payment with points	$2,398.20/mo
Points cost	$4,000.00
Monthly savings	$130.07/mo
Break-even point	30.8 months (2.6 years)

If you plan to keep the loan (not sell or refinance) past the break-even point, buying points saves money. If you'll move or refinance sooner, skipping points is usually better.

The formula

Points cost = Loan amount x (Points / 100) [1 point = 1% of the loan amount] Monthly savings = Payment without points - Payment with points Break-even (months) = Points cost / Monthly savings

Example

A $400,000, 30-year loan: 6.5% without points ($2,528.27/mo) versus 6.0% with 1 point ($2,398.20/mo, $4,000 upfront cost). Monthly savings of $130.07 means a break-even point of about 30.8 months (2.6 years) - buying the point pays off if you keep the loan longer than that.

Step-by-step guide

Get quotes for both scenarios from your lender - the rate with points and the rate without, for the exact same loan amount and term.
Enter both rates and the points cost - remember 1 point equals 1% of the loan amount as an upfront fee.
Compare the break-even point to your expected time in the loan - if you'll refinance or sell before break-even, points typically aren't worth it.

Why the "how long will you keep this loan" question matters more than the math itself

The break-even calculation itself is straightforward, but the decision ultimately hinges on a genuinely uncertain personal question: how long will you actually keep this specific loan? Someone confident they'll stay in a home for 10+ years with no plans to refinance has a strong case for buying points, since they'll comfortably clear the break-even point and then save money every month after. Someone who might relocate for a job in 2-3 years, or who expects rates to drop enough to refinance soon, could easily lose money buying points if they never reach break-even. This is why the "right" answer genuinely varies by person and circumstance, not just by the numbers on a rate sheet.

Common mistakes

Ignoring the opportunity cost of the points money - the cash spent on points could instead be invested elsewhere, which is worth weighing against the guaranteed "return" of a lower monthly payment.

Confusing discount points with origination points - discount points buy down your interest rate (what this calculator covers), while origination points are a separate lender fee that doesn't reduce your rate at all.

Frequently asked questions

Are mortgage points tax-deductible?

Often yes, for a primary residence purchase - discount points are frequently deductible as mortgage interest in the year paid, subject to IRS rules, though refinance points typically must be deducted gradually over the life of the loan instead. Consult a tax professional for your specific situation.

Can I buy a fractional point, like 0.5?

Yes - lenders commonly offer fractional points (0.25, 0.5, 0.75) as well as whole points, each buying down the rate by a smaller increment than a full point would.

Does the rate reduction per point stay consistent across all loans?

No - the exact rate reduction per point varies by lender, loan type, and market conditions at the time. Always get the specific rate quotes for your situation rather than assuming a standard reduction.

Related calculators

See the full list of Financial calculators, or try: