Mortgage Points Calculator (Are Discount Points Worth It?)
Enter your loan, the quoted rate, and how many points you'd buy. You'll see the monthly savings, the break-even month, and a plain verdict for how long you actually plan to stay in the home.
Each point costs 1% of this amount
The quoted rate before buying anything down
30 years is the standard quote
Fractions like 0.5 or 1.25 are common
Lenders typically shave 0.125-0.375% per point
Until you'd sell or refinance out of this loan
Monthly savings
$58
$2,212 at 6.5% instead of $2,270 at 6.75%
Break-even point
5 years 1 month
to earn back the $3,500 paid upfront
Verdict for a 7-year stay
Likely worth it
about $1,360 ahead by the time you leave
The same loan at 0 to 4 points
| Points | Rate | Monthly payment | Upfront cost | Break-even |
|---|---|---|---|---|
| 0 | 6.75% | $2,270 | $0 | n/a |
| 1 | 6.5% | $2,212 | $3,500 | 61 mo |
| 2 | 6.25% | $2,155 | $7,000 | 61 mo |
| 3 | 6% | $2,098 | $10,500 | 62 mo |
| 4 | 5.75% | $2,043 | $14,000 | 62 mo |
Uses your rate-cut-per-point assumption (0.25%) at every level. Real rate sheets flatten out: the fourth point usually buys less than the first, so ask for the actual quote at each level before paying for more than one or two.
Points are prepaid interest with a price tag
A discount point costs 1% of the loan and permanently lowers the rate, usually by something in the 0.125-0.375% range per point. The math is a straight trade: cash now for a smaller payment later. Two numbers decide it. The monthly saving is the payment at the quoted rate minus the payment at the bought-down rate, both from the standard amortization formula. The break-even month is the upfront cost divided by that monthly saving. Stay past break-even and points profit; leave before it and they never pay for themselves. Note that points move the note rate, which is why the APR on a loan estimate, which folds upfront costs back in, is the cleaner way to compare offers with different point counts.
One point on a $350,000 loan
Take the defaults here: $350,000 for 30 years quoted at 6.75%. One point costs $3,500 and, at a quarter percent per point, drops the rate to 6.5%. The payment falls from about $2,270 to $2,212, a saving of roughly $58 a month, so break-even lands near month 61, just past five years. Stay seven years and you finish about $1,360 ahead; move at year four and you eat a loss. That thin margin is typical: points are a bet on staying put, and the honest input is not the loan term but your own moving odds. A rate drop can break the bet too, since refinancing out of the loan restarts the clock before the points finish paying you back; the refinance calculator shows how that decision gets made.
When buying points earns its keep
Points suit buyers who are confident in a long stay, expect rates to hold or rise (so no refinance tempts them out), and still have healthy cash after the down payment and closing reserves. If cash is tight, a bigger down payment usually beats points: it shrinks the loan itself and can help clear the 20% PMI line, a guaranteed saving rather than a wager on tenure. And if the payment only works with points bought, the real question is the budget, which is what the home affordability calculator is for. Points should be bought from comfort, not stretched into.
Frequently asked questions
What are mortgage discount points?
Prepaid interest. One point costs 1% of the loan amount and buys a permanently lower rate, typically 0.125% to 0.375% off per point depending on the lender and the market. You're trading cash at closing for a smaller payment every month afterward.
How much does one point lower the rate?
There's no fixed rule. A common quote is around a quarter percent per point, which is this calculator's default, but rate sheets vary by lender, loan type, and day. The buydown also flattens: the second point usually buys less than the first. Always price the exact rate at 0, 1, and 2 points and compare.
What does break-even mean for points?
The month when your accumulated monthly savings equal what the points cost upfront. Before break-even you're behind; every month after it is pure gain. If you sell or refinance before break-even, the remaining unearned savings are simply lost.
Are points the same as origination fees?
No. Discount points buy a lower rate; origination points are a lender's fee for making the loan and buy you nothing. Both are quoted as percentages of the loan, which is why loan estimates list them separately. This calculator only models discount points.
Are mortgage points tax-deductible?
Points are prepaid interest, so they can be deductible for itemizers, sometimes in the year paid for a purchase and usually spread over the loan for a refinance. The rules have conditions, so treat any deduction as a bonus rather than part of the core math, and confirm your situation with a tax professional.
Does this calculator save my numbers?
No. Everything runs in your browser and nothing you type is stored or sent anywhere.
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