Mortgage Points Calculator
Discount points let you pay cash up front to buy down your mortgage rate. This calculator shows your lower payment, what the points cost, your monthly savings and exactly how long it takes to break even.
Disclaimer: This calculator provides estimates for general informational and educational purposes only. It is not financial, lending, tax or legal advice, and it does not guarantee any loan terms, rate, payment or approval. Actual figures depend on your lender, credit, location and the final terms of any loan. Always confirm numbers with a licensed mortgage lender, financial advisor or housing counselor before making a decision.
How the mortgage points calculator works
Discount points are prepaid interest. Instead of paying that interest month by month inside your payment, you hand the lender a lump sum at closing and they give you a lower rate in return. One point equals 1% of your loan amount, so on a $320,000 loan one point costs $3,200. Buying that point typically shaves your rate by roughly 0.25 percentage points, though the exact reduction varies by lender and changes from day to day. In plain terms, you are trading cash now for a smaller payment every month for as long as you keep the loan.
The calculator first works out what your principal-and-interest payment would be at the no-points rate, then recalculates it at the lower rate you buy with points. The difference between those two payments is your monthly saving. It also multiplies your loan amount by the number of points to find what the points cost up front.
The key number is the break-even point — how many months it takes for those monthly savings to add back up to what you paid for the points:
Break-even (months) = cost of points ÷ monthly saving
If you keep the loan past that point, every month afterward is pure saving. If you sell or refinance before then, you never recover the cost of the points.
A worked example
Take the defaults: a $320,000 loan over 30 years at 6.5% with no points, and you buy 1 point that lowers the rate by 0.25%:
- The point costs 1% of $320,000 = $3,200 at closing.
- Your rate drops from 6.5% to 6.25%.
- The payment falls from about $2,023/month to about $1,970/month — a saving of roughly $53 a month.
- Dividing $3,200 by $53 gives a break-even of about 60 months, or five years.
So if you expect to keep this mortgage longer than about five years, the point pays for itself and then keeps saving you money. If you might move or refinance within five years, paying $3,200 for the point would likely be a loss.
What affects whether points are worth it
- How long you will keep the loan. This is the single biggest factor. Points only pay off if you hold the loan past break-even, so be honest about whether you will sell or refinance first.
- The actual rate reduction offered. A point that drops the rate 0.375% breaks even far faster than one that drops it only 0.125%. Always use the lender's real quote, not a rule of thumb.
- Tax treatment. If you itemize and the points are deductible, the effective cost can be lower — but the rules differ between purchases and refinances, so check with a tax pro.
- Opportunity cost of the cash. The money spent on points cannot be invested, used for a bigger down payment, or kept as an emergency fund. Weigh what else that cash could do.
The 0.25% per point figure is only a rule of thumb. The real rate reduction depends on the lender, loan type and the market that day, and can be higher or lower. Always plug in your lender's actual quote. Note too that discount points are not the same as origination or other lender fees — those are charges for making the loan and do not buy down your rate.
Frequently asked questions
What is a mortgage point?
A mortgage discount point is prepaid interest you buy at closing to lower your interest rate. One point costs 1% of your loan amount — on a $320,000 loan that is $3,200. In exchange the lender reduces your rate, which lowers your monthly principal-and-interest payment for the life of the loan.
Are mortgage points tax deductible?
Discount points are generally deductible because the IRS treats them as prepaid mortgage interest, but the rules differ for a purchase versus a refinance, and they depend on whether you itemize. On a refinance you often have to spread the deduction over the life of the loan. This is general information, not tax advice — confirm your situation with a qualified tax professional.
Are mortgage points worth it?
It comes down to how long you keep the loan. If you stay past the break-even point — where your accumulated monthly savings finally cover the up-front cost of the points — the points pay off and save you money for years afterward. If you sell, refinance or pay off the loan before break-even, you lose money on the points.
What is the difference between discount points and origination points?
Discount points lower your interest rate; they are optional and you choose to buy them. Origination points (or an origination fee) are what the lender charges to process and underwrite the loan — they are a cost of getting the mortgage and do not reduce your rate. Only discount points buy down your rate, so do not confuse the two when comparing quotes.
Can I negotiate mortgage points?
Yes. The rate reduction you get per point varies by lender and even by the day, so it is worth shopping several lenders and asking each to quote the rate with and without points. You can also sometimes have the seller pay points as a concession, or negotiate the number of points down. Always compare the actual quoted rates rather than relying on a rule of thumb.
How accurate is the 0.25% per point estimate?
It is only a rule of thumb. In practice a point typically lowers the rate somewhere around a quarter of a percentage point, but the real figure depends on the lender, the loan type and current market conditions and can be more or less. Use the rate-reduction-per-point field to match your lender’s actual quote for an accurate result.
Related tools
Buying points is often part of a bigger refinance decision, so pair this with the refinance calculator to compare your whole loan, the break-even calculator to focus on payback time, the closing cost calculator to estimate the fees that come with points, and the cash-out refinance calculator if you want to tap your equity at the same time.