Mortgage Points Calculator
Buying points lowers your rate but costs cash today. See the exact break-even point before deciding if it's worth it.
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Break-Even Point
60 months
Worth it — you break even before you plan to move
Break-even vs. how long you plan to stay
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Last updated: August 17, 2026 · Reviewed by the DoCalc team
What Are Mortgage Discount Points?
A discount point costs 1% of your loan amount, paid upfront at closing, in exchange for a lower interest rate for the life of the loan — commonly around a 0.25% rate reduction per point, though the exact trade varies by lender and market conditions. The question is never whether points lower your rate (they do); it's whether the upfront cost pays for itself before you sell or refinance.
The Formula
Once monthly savings recover the upfront point cost, every month after that is pure savings for as long as you keep the loan. If you sell or refinance before the break-even point, buying points was a net loss.
Worked Example
On a $320,000 loan, one point costs $3,200. If that point drops your rate from 6.75% to 6.50%, your payment falls from about $2,076/mo to $2,023/mo — a $53/mo savings. Break-even is $3,200 ÷ $53 ≈ 60 months, about 5 years. If you plan to stay in the home at least that long, the point pays for itself and then some; if you expect to move or refinance sooner, it doesn't.
Points vs. Using That Cash Elsewhere
| Use of cash | Return profile |
|---|---|
| Buy points | Guaranteed savings, but only if you keep the loan past break-even |
| Larger down payment | Reduces loan amount and may avoid PMI — different math, see Down Payment Calculator |
| Keep as cash reserve / invest | Liquid and flexible, but no guaranteed return against the mortgage rate |
Pros and Cons of Buying Points
Pros: a permanently lower rate and payment for the life of the loan, with savings that compound the longer you stay.
Cons: the upfront cash is locked in immediately and only pays off with time — a poor trade for anyone likely to sell, refinance, or relocate within a few years of closing.
Who Should Use This Calculator
Use it if a lender has quoted you a points option and you want to know the real break-even before committing cash at closing. Skip or reconsider it if you're not confident you'll stay past the break-even point, or if that cash would clear higher-interest debt first.
Frequently Asked Questions
How much does one mortgage point cost?
One point costs 1% of your loan amount, paid upfront at closing — on a $320,000 loan, that's $3,200 per point.
How much does a point actually lower my rate?
It varies by lender and market, but roughly 0.25% per point is a common, though not universal, benchmark. Your Loan Estimate will show the exact rate/point trade-off your lender is offering.
What's a good break-even period for buying points?
There's no universal answer — it depends entirely on how long you're confident you'll keep the loan. If you're not sure you'll stay past the break-even month, points are a riskier bet.
Can I buy a fraction of a point?
Yes — many lenders allow fractional points (e.g., 0.5 or 0.25), which proportionally reduce both the cost and the rate benefit.
Are points tax-deductible?
In the US, points on a primary home purchase are often deductible in the year paid, subject to IRS rules and limits — consult a tax professional, since eligibility depends on your specific situation.
What if I plan to refinance before the break-even point?
Then buying points is very likely a net loss — you'd pay the upfront cost but never fully recover it in monthly savings before starting over with a new loan.