Costs and break-even
Mortgage Points Calculator: Is Buying Down Your Rate Worth It?
Paying points lowers your rate, but costs cash at closing. Find out how many months of lower payments it takes to get that cash back.
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Points break-even
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In plain words
Paying 1% points on a $350,000 loan costs $3,500 and lowers the rate from 7.4% to 7.15%, saving $59 a month in principal and interest. You earn the cost back after 59 months (4 yrs 11 mo).
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Key figures
- Months to break even59 months (4 yrs 11 mo)
- Cost of the points$3,500
- Monthly payment saving$59
- Net after 5 years$64
- Net after 10 years$3,629
- Net savings
View chart as table
| Year | Net savings |
|---|---|
| Year 0 | -$3,500 |
| Year 1 | -$2,787 |
| Year 2 | -$2,074 |
| Year 3 | -$1,361 |
| Year 4 | -$649 |
| Year 5 | $64 |
| Year 6 | $777 |
| Year 7 | $1,490 |
| Year 8 | $2,203 |
| Year 9 | $2,916 |
| Year 10 | $3,629 |
| Year 11 | $4,342 |
| Year 12 | $5,054 |
| Year 13 | $5,767 |
| Year 14 | $6,480 |
| Year 15 | $7,193 |
Compare points
| Scenario | Rate with points (%) | Cost of the points | Monthly payment saving | Months to break even |
|---|---|---|---|---|
| 0.5 points | 7.28% | $1,750 | $30 | 59 months (4 yrs 11 mo) |
| 1 points | 7.15% | $3,500 | $59 | 59 months (4 yrs 11 mo) |
| 2 points | 6.9% | $7,000 | $118 | 60 months (5 yrs 0 mo) |
Year by year
| Year | Savings so far | Net savings |
|---|---|---|
| Year 1 | $713 | -$2,787 |
| Year 2 | $1,426 | -$2,074 |
| Year 3 | $2,139 | -$1,361 |
| Year 4 | $2,851 | -$649 |
| Year 5 | $3,564 | $64 |
| Year 6 | $4,277 | $777 |
| Year 7 | $4,990 | $1,490 |
| Year 8 | $5,703 | $2,203 |
| Year 9 | $6,416 | $2,916 |
| Year 10 | $7,129 | $3,629 |
| Year 11 | $7,842 | $4,342 |
| Year 12 | $8,554 | $5,054 |
| Year 13 | $9,267 | $5,767 |
| Year 14 | $9,980 | $6,480 |
| Year 15 | $10,693 | $7,193 |
How to use this calculator
- Enter the loan amount.
- Enter the number of discount points the lender quoted.
- Enter the rate without points and the lower rate with points, from the same lender on the same day.
- Choose the loan term.
- Compare the break-even month with how long you expect to keep the loan before selling or refinancing.
Discount points let you pay more at closing in exchange for a lower interest rate for the life of a fixed-rate loan. Whether that is a good trade comes down to one question: will you keep the loan long enough for the lower payment to repay the upfront cost? This mortgage points calculator answers it in months.
How this mortgage points calculator works
The calculator works out the cost of the points, the monthly payment at each rate, and how long the saving takes to cover the cost:
Cost of points = loan amount × points ÷ 100
Monthly saving = payment at the higher rate − payment at the lower rate
Break-even (months) = cost of points ÷ monthly saving, rounded up
Both payments use the standard formula for a fixed-rate loan, M = P × r ÷ (1 − (1 + r)^−n), where P is
the loan amount, r is the yearly rate ÷ 12 and n is the number of monthly payments.
Worked examples
Example 1: one point on a 30-year loan
A buyer borrows $350,000 for 30 years. The lender quotes an assumed 6.5% with no points, or an assumed 6.25% with one point.
- Cost of the point: $350,000 × 1% = $3,500.
- Payment at 6.5%: about $2,212. Payment at 6.25%: about $2,155.
- Monthly saving: about $57.
- Break-even: $3,500 ÷ $57.23 = 61.2, rounded up to 62 months, or about 5 years and 2 months.
If the buyer stays and keeps the loan for 10 years, the point pays off. If they refinance in three years, it does not.
Example 2: two points, 30 years versus 15 years
The same buyer is offered an assumed 6.0% for two points ($7,000).
- On the 30-year loan, the payment falls from about $2,212 to about $2,098, saving about $114 a month. Break-even: 62 months.
- On a 15-year loan with the same two rates, the payment falls from about $3,049 to about $2,954, saving only about $95 a month. Break-even: 74 months.
The same rate cut saves fewer dollars a month on a shorter loan, because more of each payment is principal. Points tend to pay off faster on longer, larger loans.
What your result means
| Your plans | Compared with break-even | What it suggests |
|---|---|---|
| Keeping the loan well past the break-even point | Longer | Points may save money |
| Unsure, or close to the break-even point | About the same | Thin benefit; consider keeping the cash |
| Likely to sell or refinance soon | Shorter | Points likely cost more than they save; consider lender credits instead |
Also weigh what else the cash could do. Money spent on points cannot go toward a bigger down payment, which might avoid PMI, or toward savings for repairs. If rates fall and you refinance, the points you paid are gone.
Program rules that change the answer
| Situation | Rule | Effect |
|---|---|---|
| Qualified Mortgage | Total points and fees generally capped at 3% of the loan for larger loans | Limits how many points you can pay |
| Seller concessions | Programs cap how much a seller can pay toward your costs | Seller-paid points save your own cash |
| Tax deduction, purchase | Points on your main home may be deductible in the year paid, if you itemize | Can shorten the real break-even |
| Tax deduction, refinance | Generally deducted over the life of the loan | Smaller yearly benefit |
| Adjustable-rate loans | Lower start rate only lasts until the first adjustment | Points rarely pay off fully on ARMs |
Assumptions
- Fixed-rate loan for the full term; both rates are from the same lender for the same loan.
- Points are paid in cash at closing, not financed.
- Only principal and interest are compared. Taxes, insurance and mortgage insurance are the same either way.
- No tax effect is included; any deduction would shorten the break-even.
- The rate-with-points box starts a quarter point below the national weekly average, as a placeholder only.
Common mistakes
- Comparing quotes from different days or lenders. Rates move daily; compare one lender’s options side by side.
- Confusing points with origination fees. Discount points buy down the rate; origination charges do not. Check the Loan Estimate.
- Ignoring refinance plans. If you think rates may fall and you would refinance, the break-even point may never arrive.
- Forgetting the cash you need at closing. Points add to the cash needed alongside the down payment and other costs; see the closing cost calculator.
Limits of this estimate
Lenders price points in different steps, and some offer lender credits on the other side. Ask each lender for a Loan Estimate at zero points and with points, then use their exact figures here. If you are refinancing, check the whole deal with the refinance break-even calculator. Read the conventional loan guide for how pricing works on conforming loans, and ask a tax professional before counting on a deduction.
For context, the national average 30-year fixed rate was 7.40% as of October 15, 2026 (Freddie Mac). FHA, VA and USDA rates are set by each lender and often differ.Source: Freddie Mac Primary Mortgage Market Survey, via FRED
Frequently asked questions
What are mortgage points?
Discount points are an upfront fee you pay at closing to get a lower interest rate. The IRS describes them as prepaid interest. One point usually equals 1% of the loan amount, so one point on a $350,000 loan costs $3,500.
How much does one point lower the rate?
There is no fixed rule. Each lender prices points differently, and the reduction changes with the market. Ask for quotes at zero, one and two points from the same lender on the same day, and test each one here.
How do I know if buying points is worth it?
Compare the break-even month with how long you will keep the loan. If you are likely to sell or refinance before the break-even point, the points cost more than they save.
Are mortgage points tax deductible?
Sometimes. Under IRS rules, points paid on a loan to buy your main home may be deductible in the year you pay them if you itemize and meet the conditions. Points on a refinance are generally deducted over the life of the loan.
Can the seller pay my points?
Often yes, as part of seller concessions, within the limits of your loan program. Seller-paid points lower the rate without using your cash, which changes the break-even question.
What are lender credits?
Lender credits are the opposite of points: you accept a higher rate and the lender pays part of your closing costs. They can make sense if you expect to keep the loan only a short time.
Is there a limit on points?
For a loan to be a Qualified Mortgage, total points and fees are capped, generally at 3% of the loan for larger loans, with higher limits for small loans. Some discount points can be left out of that count under the rule.
Sources
Read the guides
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