Mortgage Points Calculator
Mortgage discount points are an upfront fee you pay to your lender in exchange for a lower interest rate. One point equals 1 percent of your loan amount. This calculator helps you decide whether buying points makes financial sense by finding your break-even point: the number of months it takes for the monthly savings to recoup the upfront cost. Enter the number of points you're considering, the base rate your lender quoted, the rate reduction per point, and your loan term. The tool shows your monthly payment without points and with points, plus the total savings over your planned stay. If your break-even falls within or before your expected ownership period, buying points typically adds value. The calculator also works in reverse: see how long you need to stay to justify the cost, and compare against alternative uses of that upfront cash.
Buying 2 points on a $350,000 loan costs -- upfront and saves --/month. Break-even: --.
How the mortgage points calculation works
Buying discount points is a trade-off: you pay more upfront (the cost of the points) to get a lower monthly payment for the life of the loan. The key question is whether you will stay long enough to recoup the cost. The CFPB explains this at consumerfinance.gov.
Upfront cost = loan x points x 0.01
Rate with points = base rate - (points x rate reduction per point)
Monthly P+I (PMT) = principal x r x (1+r)^n / ((1+r)^n - 1)
Monthly savings = payment without points - payment with points
Break-even months = upfront cost / monthly savings
Net savings over stay = (monthly savings x planned months) - upfront cost
Worked example
$350,000 loan, 2 points at 0.25%/point reduction, 7.0% base rate, 30-year term, 7-year planned stay:
- Upfront cost = $350,000 x 0.02 = $7,000
- Rate with points = 7.0% - (2 x 0.25%) = 6.5%
- Monthly payment at 7.0%: r = 0.005833, n = 360 = $2,328.56
- Monthly payment at 6.5%: r = 0.005417, n = 360 = $2,212.24
- Monthly savings = $2,328.56 - $2,212.24 = $116.32
- Break-even = $7,000 / $116.32 = 60.2 months (5.0 years)
- Net savings over 7 years = ($116.32 x 84) - $7,000 = $2,770.88
Points, lender credits and your Loan Estimate
Your lender is required to give you a Loan Estimate within three business days of receiving your application. This document shows the interest rate and closing costs for each points scenario they offer. Look at Section A of Page 2 for "Origination Charges" to see what each option costs.
Lender credits work in reverse: the lender pays toward your closing costs, and you accept a higher rate. If you are short on cash at closing or plan to sell or refinance within a few years, lender credits may be a better deal than paying points.
The rate reduction per point varies by lender, loan type and current market conditions. This calculator defaults to 0.25% per point as a common approximation. Always use the actual rate your lender quotes for a precise calculation.
Mortgage points calculator: frequently asked questions
What are mortgage discount points?
Mortgage discount points are an upfront fee paid to the lender in exchange for a lower interest rate. One point equals 1% of the loan amount. Paying points 'buys down' your rate. The CFPB explains this at consumerfinance.gov/ask-cfpb/what-are-discount-points-and-lender-credits-and-how-do-they-work-en-136/.
How much does one point typically lower your rate?
The rate reduction per point varies by lender, loan type and market conditions. A common rule of thumb is 0.25 percentage points per point, but you should get a Loan Estimate from your lender showing the exact rate for each points option. The actual reduction can range from 0.125% to 0.375% per point.
Are mortgage points tax deductible?
Discount points paid on a mortgage to buy or improve your primary residence are generally deductible as home mortgage interest in the year paid, if you meet certain conditions. Points paid on a refinance must usually be deducted over the life of the loan rather than all in year one. See IRS Publication 936 and consult a tax professional for your situation.
When does buying mortgage points make financial sense?
Points make sense when you plan to stay in the home long enough for the monthly savings to exceed the upfront cost. The break-even point is the number of months to recoup the cost. If your break-even is 48 months and you plan to stay 10 years, buying points is likely worthwhile. If you may sell or refinance before the break-even, points are probably not worth it.
What is the difference between origination points and discount points?
Origination points are fees the lender charges to process your loan; they do not lower your interest rate. Discount points are prepaid interest that specifically buys down your rate. Your Loan Estimate will list them separately under 'Origination Charges.' Only discount points affect your interest rate and the calculations on this page.
Can I get lender credits instead of paying points?
Yes. Lender credits work in the opposite direction: the lender gives you money toward closing costs in exchange for a higher interest rate. This reduces your upfront cash but increases your monthly payment. The CFPB explains lender credits alongside discount points at consumerfinance.gov/ask-cfpb/what-are-discount-points-and-lender-credits-and-how-do-they-work-en-136/.
Official sources
- CFPB: What are discount points and lender credits?
- CFPB: Owning a Home - loan options
- IRS: Publication 936 - Home Mortgage Interest Deduction (points deductibility)
Reviewed by the CalculatorHub team, edited by James Graham, 13 June 2026. See our methodology. General information, not financial or tax advice.