Mortgage Points Break-Even Calculator

Decide whether paying discount points is worth it: compare monthly payments with and without points and find the break-even month.

Result

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How to use this calculator

Enter the loan amount and the two interest rates (with and without points).
Enter how many points you are buying (1 point = 1% of the loan).
Enter the loan term in years.
Read the break-even month — keep the loan longer than this for points to be worth it.

About this calculator

Discount points let you pay money upfront at closing to lower your mortgage interest rate — essentially prepaying interest. Each point costs 1% of the loan amount and typically shaves a fraction of a percent off the rate. Whether that trade is worth it comes down to how long you keep the loan. This calculator computes your monthly principal-and-interest payment both with and without points, finds the monthly savings, and divides the upfront cost by those savings to get the break-even month — the point at which the cumulative savings finally exceed what you paid. If you keep the mortgage past break-even, the points pay off; if you sell or refinance before then, you lose money. The tool also estimates the lifetime interest saved if you hold the loan to term.

How it works — the formula

Payment = L · r(1+r)ⁿ / ((1+r)ⁿ − 1)   (r = monthly rate, n = months)
Points cost = Loan × points%
Break-even months = Points cost ÷ (Payment_no − Payment_with)

Standard amortization gives each monthly payment; the difference is the monthly saving from the lower rate, and the upfront cost divided by that saving is the break-even time.

Source: CFPB — Discount points and lender credits

Worked examples

Example 1

$300k, 7%→6.75%, 1 point, 30 yr

Inputs:: loan=300000, rateNoPoints=7, rateWithPoints=6.75, points=1, term=30
Output:: save $50.11/mo, break-even ≈ 59.9 months

Example 2

$400k, 6.5%→6%, 2 points, 30 yr

Inputs:: loan=400000, rateNoPoints=6.5, rateWithPoints=6, points=2, term=30
Output:: break-even on $8,000 cost

Example 3

$200k, 7%→6.5%, 1 point, 15 yr

Inputs:: loan=200000, rateNoPoints=7, rateWithPoints=6.5, points=1, term=15
Output:: faster break-even on shorter term

Limitations

Compares principal-and-interest only; excludes taxes, insurance, PMI.
Ignores the time value of money and points' tax deductibility.
Assumes you hold the same loan; refinancing resets the math.

Decision-support estimate; confirm exact rates and point costs with your lender.

Frequently asked

What is a mortgage discount point?+

A discount point is an upfront fee equal to 1% of the loan amount that you pay at closing to reduce your interest rate. Buying points is sometimes called "buying down" the rate. The savings come as a lower monthly payment for the life of the loan.

How do I calculate the break-even on points?+

Divide the upfront cost of the points by the monthly payment savings they buy. If a point costs $3,000 and lowers your payment by $50 a month, you break even after $3,000 ÷ $50 = 60 months (5 years).

Are discount points worth it?+

It depends on how long you keep the loan. If you will stay well past the break-even month, points save you money overall. If you might sell or refinance sooner, you would lose the upfront cost — so points favor long-term holders.

How much does one point lower my rate?+

It varies by lender and market, but a point often reduces the rate by roughly 0.25%. This calculator lets you enter the exact "with points" rate your lender quotes, rather than assuming a fixed reduction.

Does this account for taxes or the time value of money?+

No. It compares nominal monthly payments only. Mortgage points may be tax-deductible, which shortens the effective break-even, while the time value of money lengthens it. Treat the result as a solid first approximation.

What are negative points or lender credits?+

The opposite of discount points: the lender gives you credit toward closing costs in exchange for a higher rate. That can make sense if you are short on cash at closing or plan to move soon — the mirror image of buying points.