Mortgage Points Buydown Calculator
Buying mortgage points lets you pay cash at closing to lock in a lower interest rate for the life of the loan, and this calculator tells you whether that trade is worth it. Each point costs one percent of the loan amount and typically shaves a fraction off your rate. The catch is that the upfront cost only pays off if you hold the mortgage long enough for the smaller monthly payments to add up to more than you spent. That tipping point is called the break-even month. This tool takes your loan amount, the number of points and their cost, the original rate, the lower bought-down rate and the term, then computes the monthly payment at each rate using the standard amortizing payment formula. It reports the cost of the points, the monthly saving, and the exact month at which your savings overtake the upfront cost. If you plan to sell or refinance before that month, points lose you money; if you stay past it, every month afterward is pure saving. Every figure is computed deterministically, with a worked example below that reconciles exactly to the calculator so you can verify each step yourself.
Points buydown weighs the upfront cost against the monthly saving from a lower rate: break-even months = cost / monthly saving. On a 300,000 loan, paying 2 points (6,000) to cut the rate from 7% to 6.5% saves $99.70 a month and breaks even at month 61.
Points buydown formula
Cost = points x 1% x loan amount
Payment = L x i / (1 - (1 + i)^-n)
i = monthly rate (annual / 12), n = months (years x 12)
Monthly saving = payment(original) - payment(bought-down)
Break-even month = Cost / monthly saving (rounded up)
The amortizing payment formula gives the level monthly payment at each rate. The difference is your monthly saving, and the cost divided by that saving is how many months you must keep the loan to come out ahead.
Worked example
A 300,000 loan over 30 years. You pay 2 points to cut the rate from 7% to 6.5%.
- Cost = 2 x 1% x 300,000 = 6,000.
- Payment at 7%: i = 0.07 / 12, n = 360, gives 1,995.91 per month.
- Payment at 6.5%: i = 0.065 / 12, n = 360, gives 1,896.20 per month.
- Monthly saving = 1,995.91 - 1,896.20 = 99.70.
- Break-even = 6,000 / 99.70 = 60.18, so month 61.
These are the calculator's default inputs, so the result above matches the widget exactly.
Mortgage points buydown calculator: frequently asked questions
What are mortgage discount points?
A discount point is an upfront fee you pay the lender at closing to lower your interest rate. One point costs 1% of the loan amount. In return, the lender reduces your rate, often by about a quarter of a percentage point per point, though the exact reduction varies by lender. Points are sometimes called buying down the rate.
When is buying points worth it?
Points pay off only if you keep the loan past the break-even month, the point at which accumulated monthly savings equal the upfront cost. If you sell or refinance before then, you lose money. The longer you plan to keep the mortgage, the more attractive points become. This calculator shows your exact break-even month.
How is the cost of points calculated?
Cost equals the number of points times 1% of the loan amount. Two points on a 300,000 loan cost 2 x 1% x 300,000, which is 6,000, paid at closing. Lenders may allow fractional points, such as 0.5 or 1.75, and the cost scales the same way.
Are mortgage points tax deductible?
Points paid to buy down the rate on a loan for your main home may be deductible, sometimes in full in the year paid and sometimes spread over the loan term. The rules are set by the Internal Revenue Service and depend on your situation, so confirm with a tax professional. This calculator does not model any tax effect.
What is the points break-even formula?
Break-even months equals the cost of the points divided by the monthly payment saving. The monthly saving is the difference between the payment at the original rate and the payment at the bought-down rate, each computed with the standard amortizing payment formula.
Official sources
- Mortgage rates, points and the cost of borrowing: US Securities and Exchange Commission, Investor.gov. As at 25 June 2026.
Reviewed by the CalculatorHub team, edited by James Graham, 25 June 2026. See our methodology. This is general information, not financial, tax, legal or investment advice.