Mortgage Points Calculator
Discount points are an upfront fee you pay to lower your mortgage interest rate. This calculator shows what the points cost, the monthly payment they save, how long it takes to break even, and the net interest you save over the whole loan after paying for the points.
Formula
Worked example
On a $300,000 loan, 1 point costs $3,000 and cuts the rate from 6.5% to 6.25%. The 30-year payment falls from about $1,896 to $1,847, a $49/mo saving. Break-even ≈ 3,000 ÷ 49 ≈ 61 months (about 5 years), and held to term you save roughly $14,700 in interest, about $11,700 net after the points.
What discount points actually buy you
A discount point is a prepaid fee equal to 1% of your loan amount that lenders accept in exchange for a lower interest rate. On a $300,000 mortgage, one point costs $3,000. The rate reduction per point varies by lender and market, but a quarter of a percentage point per point is a common rule of thumb. Because the fee is paid at closing, points only make financial sense when the smaller monthly payment eventually adds up to more than what you paid upfront. If your lender quotes an exact rate with points instead of a rule-of-thumb cut, switch the rate mode and enter that quote directly for a precise result.
How the break-even calculation works
Break-even is the number of months at which your accumulated monthly savings equal the upfront cost. The calculator amortizes your loan twice, once at the original rate and once at the reduced rate, and takes the difference in the monthly payments as your saving. Dividing the upfront cost by that monthly saving gives the break-even month. Keep the loan longer than break-even and points are a net win; sell or refinance before then and you lose the difference, which is why your expected time in the home is the deciding factor. You can add other closing costs tied to the points scenario so the break-even reflects the full cash outlay, not just the points.
Lifetime interest saved and net savings
Beyond the break-even month, the calculator shows the total interest you save over the full term and the net saving after subtracting what the points cost. A lower rate trims a little interest from every one of your payments, so over a 30-year loan the cumulative interest saved is usually far larger than the points cost, provided you actually keep the loan that long. The net saving figure makes the trade-off explicit: it is the lifetime interest saved minus the upfront cost. If that number is negative, the quote is not worth it even held to term.
Financing the points and comparing scenarios
The advanced options let you roll the points and closing costs into the loan instead of paying cash. When financed, you also pay interest on that amount, which lengthens break-even and shrinks the net saving, so the cash-paid option is usually better if you have the funds. The scenario table compares no points, your chosen points, and double the points side by side, showing the monthly payment, lifetime interest, break-even and net saving for each. Use it to see whether buying more points keeps paying off or hits diminishing returns at your lender quoted cut per point.
Points versus a larger down payment
Buying points is not the only use for cash at closing. The same money could go toward a larger down payment, which shrinks the loan, lowers the payment, and may help you avoid private mortgage insurance. Points lower the rate on whatever you borrow, while a bigger down payment lowers how much you borrow. The right choice depends on your rate, how long you will hold the loan, and whether crossing an 80% loan-to-value threshold would remove mortgage insurance.
Typical points and rate reductions
| Points | Cost on $300k loan | Approx. rate cut | Payback speed |
|---|---|---|---|
| 0.5 | $1,500 | ~0.125% | Fast |
| 1 | $3,000 | ~0.25% | Moderate |
| 2 | $6,000 | ~0.50% | Moderate |
| 3 | $9,000 | ~0.75% | Slow |
Illustrative only, actual rate cuts per point vary by lender, loan type, and market conditions.
Frequently asked questions
How much does one mortgage point cost?
One discount point equals 1% of your loan amount. On a $300,000 mortgage, one point costs $3,000, paid at closing. Lenders also let you buy fractional points, such as half a point for $1,500 on the same loan.
How much does one point lower my rate?
There is no fixed rule, but lenders commonly drop the rate by about 0.25 percentage points per point. The exact reduction depends on the lender, loan type, and market, so always compare the specific rate offered with and without points. If you know the exact quoted rate, switch the calculator to direct rate mode and enter it.
When is buying points worth it?
Points pay off if you keep the mortgage past the break-even point, the month when your accumulated payment savings equal the upfront cost. If you expect to sell or refinance before then, you will likely lose money, so points favor long-term owners. The net lifetime saving figure shows the full payoff if you hold the loan to term.
Should I pay for points in cash or roll them into the loan?
Paying cash is usually cheaper because financed points are added to your principal and accrue interest for the life of the loan, which pushes back break-even and lowers the net saving. Turn on the advanced option to model both, but if you have the cash and plan to keep the loan, paying upfront generally wins.
How much total interest do points save over the loan?
Because a lower rate trims interest from every payment, the lifetime interest saved over a 30-year loan is often several times the points cost. The calculator shows this figure and the net saving after the upfront cost, so you can weigh the long-term benefit against how long you actually plan to stay.