Mortgage Points Calculator
Should you buy mortgage points? Calculate the upfront cost, monthly savings, and break-even period. Compare buying points vs putting the same money toward a bigger down payment. Works with any currency.
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How to Use This Calculator
Tab "Points Cost & Savings"
Enter your loan amount, base interest rate, rate reduction per point (typically 0.25%), number of points, and loan term. The calculator shows the upfront cost of the points, your old and new monthly payments, and how much you save in total interest over the life of the loan.
Tab "Break-Even"
Using the same inputs, this tab divides the cost of points by your monthly savings to find exactly how long it takes to recoup the upfront expense. If you plan to stay in the home or keep the mortgage longer than the break-even period, buying points is worthwhile.
Tab "Points vs Bigger Down Payment"
What if you put the same dollar amount toward a bigger down payment instead of buying points? This tab compares both scenarios side by side: a smaller loan at the original rate vs the full loan at a lower rate. It shows which option saves more in total interest.
The Formulas
Cost = Loan Amount × (Number of Points / 100)
Monthly payment:
M = P × r(1+r)n / ((1+r)n − 1)
where P = principal, r = monthly rate (annual / 12 / 100), n = total months
New interest rate:
New Rate = Base Rate − (Rate Reduction per Point × Number of Points)
Break-even period:
Break-Even Months = Cost of Points / Monthly Savings
Total interest:
Total Interest = (Monthly Payment × Number of Months) − Loan Amount
All calculations are universal and pre-tax. No country-specific tax deductions, PMI adjustments, or insurance costs are applied. Results are estimates.
Worked Examples
Example 1 — $400K loan, buy 2 points, rate drops from 6.5% to 6.0%
A borrower takes a $400,000 30-year fixed mortgage at 6.5% and buys 2 discount points to reduce the rate to 6.0%.
Buying 2 points costs $8,000 upfront but saves $130 every month and $38,800 in total interest over the full 30-year term. The key question is whether you will keep the mortgage long enough to recoup the $8,000.
Example 2 — Break-even: when do the points pay for themselves?
Using the same scenario: $8,000 in points, $130/month savings.
If you keep the mortgage for at least 5.1 years, the points pay for themselves. After that, every month is pure savings. If you sell or refinance before 5.1 years, you lose money on the points.
Example 3 — $8,000 on points vs $8,000 extra down payment
Compare two ways to use the same $8,000: buy points (lower rate on $400K) or make a bigger down payment (lower loan of $392K at original rate).
In this scenario, buying points produces significantly more savings than a bigger down payment. Points reduce the interest rate on the entire $400,000 balance, while $8,000 extra down payment only removes a small fraction of the principal. The gap widens with larger loans and longer terms.
Understanding Mortgage Points
What Are Mortgage Discount Points?
A mortgage discount point is a fee you pay your lender at closing to buy down your interest rate. One point equals 1% of your loan amount. Points are essentially prepaid interest — you pay more upfront in exchange for lower monthly payments over the life of the loan.
When Do Points Make Sense?
Points are worth buying when you plan to keep the mortgage long enough to pass the break-even point. They make the most sense for borrowers who plan to stay in the home for 7+ years, are not likely to refinance soon, and have cash available at closing beyond the down payment and closing costs.
Points vs Origination Fees
Discount points (which lower your rate) are different from origination points (which are a lender fee). Origination points do not reduce your rate. When comparing offers, make sure you know which type of point is being quoted.
Fractional Points
You do not have to buy whole points. Many lenders allow you to buy 0.5, 1.5, or any fractional amount. Each fraction reduces your rate proportionally. The calculator supports any decimal value.