🎯 Mortgage Points Calculator

Mortgage points — also called discount points — are fees you pay upfront to a lender at closing in exchange for a lower interest rate over the life of the loan. One point typically costs 1 percent of the loan amount and reduces the interest rate by about 0.25 percentage points, though the exact trade-off varies by lender and market conditions. On a $300,000 loan, one point would cost $3,000 and might lower a 7.00 percent rate to 6.75 percent. Because the lower rate applies every month for as long as you hold the mortgage, the upfront fee can pay for itself over time through reduced monthly payments.

The critical question is whether you will keep the loan long enough for the monthly savings to exceed what you paid upfront. That crossover moment is the break-even point, and it is the single most important number in the decision. If you sell the home or refinance before the break-even, buying points costs you money; if you stay beyond it, you come out ahead. The chart below illustrates how the two cost paths compare over time.

Points are sometimes tax-deductible in the year you pay them if the loan is to buy or build a primary home and you itemize deductions, but the rules are complex — consult a tax professional for your situation. Lenders also offer "negative points" (lender credits), where you receive cash upfront in exchange for a higher rate, essentially the mirror image of buying points.

For each scenario the calculator computes a monthly payment using the standard amortisation formula M = P × (r(1+r)^n) / ((1+r)^n − 1), where P is the loan amount, r is the monthly interest rate and n is the number of monthly payments. The "no points" payment uses the full quoted rate; the "with points" payment uses the reduced rate after subtracting the rate reduction times the number of points purchased.

The upfront cost of points equals the number of points times the cost per point (as a percentage of the loan amount). The monthly savings is the difference between the two monthly payments. The break-even point is the upfront cost divided by the monthly savings, expressed in months — and then converted to years and months for readability. Finally, the net savings over your holding period equals the monthly savings times the number of months in the home, minus the upfront cost. A positive figure means buying points paid off; a negative figure means it did not.

Assumes 30-year fixed-rate loan. Net values are cumulative savings (monthly savings × months − upfront cost). Your lender's pricing will differ.

For a $300,000 loan at 7% with 1 point (0.25% rate reduction), points pay off only if you stay long enough.

1. Enter your loan amount and the interest rate offered without points.
2. Enter the number of points you are considering buying.
3. Enter the cost per point as a percentage of the loan (typically 1%).
4. Enter the rate reduction per point (typically 0.25%) and your expected time in the home.
5. Click Calculate to see the upfront cost, monthly savings, break-even point and net savings.

Are mortgage points worth it?

Points are worth it when you keep the mortgage past the break-even point. If you plan to stay in the home well beyond the break-even and the upfront cash does not strain your budget, buying points can save thousands over the life of the loan. If you expect to move or refinance soon, skip them.

How much does one point lower my rate?

One discount point typically lowers the interest rate by about 0.25 percentage points, but the exact reduction varies by lender and market. Always ask your lender for their specific rate sheet, because the per-point reduction is not regulated.

Can I negotiate points with my lender?

Yes. Points and lender credits are negotiable and vary between lenders. Get quotes from at least three lenders for the same loan on the same day, and compare both the rate and the point cost side by side.

Are mortgage points tax-deductible?

Points paid on a loan to buy or build a primary residence are often deductible in the year paid if you itemize deductions, but the rules have income and use tests. Points on a refinance are usually deducted over the life of the loan. Consult a tax professional for your situation.

What is the difference between discount points and origination points?

Discount points are an optional fee you choose to pay to lower your interest rate. Origination points are a fee charged by the lender to process the loan and do not reduce your rate. This calculator only covers discount points.

This tool is for informational purposes only and does not constitute financial advice. Consult a qualified financial professional for advice specific to your situation.

The break-even point is the number that matters most, so always compare it against your realistic expected time in the home — not just an optimistic guess. If there is a decent chance you will move or refinance within the break-even window, buying points is a bet against yourself. Ask lenders for quotes with and without points on the same day so the comparison is apples-to-apples, and watch for lenders who fold the point cost into a slightly higher rate instead of listing it separately. If you are rolling the point cost into the loan balance you are also paying interest on that extra principal, which lengthens the break-even. Remember that points may be tax-deductible for a purchase mortgage on a primary residence if you itemize, which can shorten the effective break-even — but confirm with a tax advisor. Finally, the arithmetic for adjustable-rate mortgages is different because the rate reduction only applies during the fixed period, so this tool is best used for fixed-rate loans.