Mortgage Points Calculator
Find out whether buying discount points is worth it. Enter the rate with and without points and how long you expect to keep the loan, and see what the points cost, what they save each month, when they break even and what they save in total.
How to Use
- Enter the loan amount and the term.
- Enter the rate your lender quotes with no points and the lower rate it quotes with points — both are on the lender’s rate sheet or Loan Estimate.
- Enter the points as a number of points (1 point = 1% of the loan) or as a dollar amount.
- Enter how many years you expect to keep the loan before you sell or refinance.
- Read the break-even month, the monthly saving, the cost and the net saving, then check the table to see how the answer changes if you move sooner or later.
Worked Example
One point on $400,000. The lender quotes 6.75% with no points or 6.5% for one point. One point is 1% of the loan, $4,000. Over 30 years, 6.75% (r = 0.005625, n = 360) gives M = $2,594.39 a month and 6.5% (r = 0.00541667) gives $2,528.27, so the point saves $66.12 a month. Break-even is $4,000 ÷ $66.12 = 60.5, rounded up to 61 months (5 years 1 month).
Kept for 10 years. The saving adds up to $66.12 × 120 = $7,934.40, so the point nets $3,934.40. The lower rate also pays the loan down faster: after 120 payments the balance is $339,104.51 instead of $341,204.00, another $2,099.49 in your favour when you sell or refinance.
The common mistake: buying points and then moving early. Two points on a $350,000 loan cost $7,000 to cut 6.5% to 6%, saving $113.81 a month. That is a 62-month break-even. Sell after 3 years and you have saved $113.81 × 36 = $4,097.16 — $2,902.84 less than you paid ($1,736.74 less even after counting the lower balance). The lower rate looks like a saving from day one; it is a loss until the break-even month.
Show Work
Formulas
Paying Interest Up Front
Discount points are interest paid in advance: you hand the lender cash at closing and it charges a lower rate for the life of the loan. The trade works in reverse too — many lenders offer a lender credit towards closing costs in exchange for a higher rate. Discount points are different from an origination fee, which some lenders also express in points but which pays for making the loan and does not lower the rate.
In the United States the Loan Estimate, the three-page form lenders have used since the TILA-RESPA Integrated Disclosure rule took effect in October 2015, lists points on page 2 under Origination Charges as a percentage of the loan amount and in dollars. Comparing Loan Estimates for the same loan with and without points gives you the two rates and the exact cost this calculator needs. How much a point lowers the rate is set by each lender and changes with the market, so there is no fixed exchange rate between points and interest.
About This Tool
This calculator compares a fixed-rate loan with and without discount points. It prices the points (as a number of points or in dollars), works out both monthly payments and the saving, and finds the break-even month. It then totals the saving over the years you expect to keep the loan and shows separately how much less you would owe at that point. The chart follows the running gain month by month, and the table shows the result if you sell or refinance after 1 to 30 years.
Payments are rounded to the cent, as a lender bills them. Everything runs in your browser; nothing you enter is sent anywhere.
Estimates for planning and education — not financial, tax or legal advice. Points may affect your taxes; ask a tax adviser.
Related tools: Mortgage Calculator, Refinance Calculator, and Amortization Calculator.
Frequently Asked Questions
What is a mortgage point?
A discount point is a fee paid at closing in exchange for a lower interest rate. By convention 1 point is 1% of the loan amount, so on a $400,000 loan one point costs $4,000. How much each point lowers the rate is up to the lender, so compare the actual quotes rather than a rule of thumb.
How do I work out the break-even point?
Divide the cost of the points by the monthly saving. On a $400,000, 30-year loan, 6.75% costs $2,594.39 a month and 6.5% costs $2,528.27, a saving of $66.12. One point at $4,000 ÷ $66.12 = 60.5, so it takes 61 months — 5 years 1 month — to earn the money back.
Are points worth it if I might move in a few years?
Usually not. Two points on $350,000 cost $7,000 and cut 6.5% to 6%, saving $113.81 a month, so they break even after 62 months. If you sell after 3 years you have saved only $4,097.16 and are $2,902.84 behind. The shorter you keep the loan, the less points make sense.
Do points help in any way besides a lower payment?
Yes: at a lower rate more of each payment goes to principal, so you owe less when you sell or refinance. After 10 years the $400,000 loan at 6.5% has $2,099.49 less left on it than at 6.75%. Counting that, one point earns back its $4,000 after 48 months instead of 61.
Do points work the same on a 15-year loan?
The maths is the same, but the saving is smaller because the loan is shorter. One point on $300,000 over 15 years, cutting 6% to 5.75%, costs $3,000 and saves $40.34 a month, so it breaks even after 75 months and nets $4,261.20 over the full 15 years.
How do I use the Mortgage Points Calculator?
Simply type your numbers and read the result, which refreshes the instant you change something. There is nothing to submit and nothing to wait for.
Do I need to install or sign up for anything?
Not at all — it runs in the browser with nothing to install and no account. After it loads once, it even works without an internet connection.
Is my information private?
Yes. Everything happens in your browser. Nothing you type is sent to a server or saved anywhere.
Common Use Cases
Comparing two quotes
A lender offers 6.75% with no points or 6.5% for 1 point on $400,000: the point costs $4,000 and saves $66.12 a month, breaking even in 61 months.
Deciding how many points
Two points ($8,000) for 6.25% save $131.52 a month and also break even in 61 months; kept 15 years they net $15,673.60.
A short stay
Planning to move in 3 years, two points on $350,000 lose $2,902.84 — the break-even is 62 months away.
A larger loan
On $600,000, paying $6,000 to cut 7% to 6.625% saves $149.94 a month and pays back in 41 months.
Points or a bigger down payment
Put the $4,000 cost of one point next to what the same money would do as extra down payment in the Mortgage Calculator before you choose.
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