Mortgage Points Break-Even Calculator
Paying discount points to lower your mortgage rate is only worthwhile if you stay in the home long enough to recover the upfront cost through monthly savings. This calculator computes your monthly payment with and without points, the total cost of points, your monthly savings, and exactly how many months until you break even. Enter your loan details and point information to find out if buying points makes sense for your situation.
Mortgage points break-even formula
Monthly Payment = P x [r(1+r)^n] / [(1+r)^n - 1]
Where P = loan principal, r = monthly interest rate (annual rate / 12), n = number of payments (years x 12). This is the standard mortgage amortization formula used by lenders and the CFPB.
Break-Even Months = Cost of Points / Monthly Payment Savings
Cost of Points = Loan Amount x (Points / 100). Monthly Savings = Payment without points - Payment with points.
When points make sense
- You plan to stay in the home past the break-even date without refinancing.
- You have sufficient cash at closing to pay for points without depleting your reserves.
- The lender's Loan Estimate shows a meaningful rate reduction per point (0.25% or more).
- Long-term savings outweigh the opportunity cost of using that cash elsewhere.
- You expect interest rates to remain stable, making refinancing unlikely.
Mortgage points break-even calculator: frequently asked questions
What are mortgage discount points?
Mortgage discount points are upfront fees paid to the lender at closing in exchange for a lower interest rate. One point equals 1% of the loan amount. For example, on a $300,000 mortgage, one point costs $3,000. Points are sometimes called 'buying down the rate.'
How do I calculate the break-even on mortgage points?
Break-Even Months = Cost of Points / Monthly Payment Savings. Divide the total cost of the points by the reduction in your monthly payment. For example, if you pay $3,000 in points and save $50 per month, you break even in 60 months (5 years). After that, the lower rate is pure savings.
How much does one point typically lower the interest rate?
The rate reduction per point varies by lender, loan type, and market conditions. A commonly cited rule of thumb is 0.25% per point, but this can range from 0.125% to 0.375% or more. Lenders disclose the specific rate reduction for points on the Loan Estimate form required by the CFPB.
Are mortgage points tax-deductible?
Points paid on a mortgage to buy or build a primary residence may be fully deductible in the year paid if you meet IRS requirements under Publication 936 (Home Mortgage Interest Deduction). Points on refinances must generally be deducted over the life of the loan. Consult a tax professional for your situation.
Should I pay mortgage points?
Points make financial sense if you plan to keep the loan long enough to recoup the upfront cost through monthly savings. If your break-even is 60 months, you need to stay in the home (without refinancing) for at least 5 years to benefit. If you might move or refinance sooner, paying points may not be worthwhile.
Official sources
- Consumer Financial Protection Bureau (CFPB): What are discount points and lender credits?
- IRS Publication 936: Home Mortgage Interest Deduction.
- Federal Reserve Board: Selected Interest Rates (H.15).
Reviewed by the CalculatorHub team, edited by James Graham, 14 June 2026. See our methodology.