Mortgage Points Break-Even Calculator
Calculate your mortgage discount point break-even period.
See how long it takes for lower monthly payments to recoup the upfront cost of buying points.
What Are Mortgage Discount Points? One mortgage point = 1% of your loan amount paid upfront at closing. Each point typically reduces your interest rate by 0.125% to 0.25% (varies by lender). Paying points is essentially prepaying interest to get a lower rate for the life of the loan.
Monthly Payment Formula (Amortization) P = L × [r(1+r)^n] / [(1+r)^n − 1]
Where:
- P = monthly payment
- L = loan amount
- r = monthly interest rate (annual rate / 12)
- n = total number of payments (years × 12)
Break-Even Formula Monthly savings = payment without points − payment with points Break-even months = cost of points / monthly savings
Worked Example Loan: $300,000 | Term: 30 years | Rate without points: 6.75% | Rate with points: 6.25% | Points cost: $3,000
Monthly payment without points: $1,946 Monthly payment with points: $1,847 Monthly savings: $99 Break-even: $3,000 / $98.64 = 30.4 months (about 2.5 years)
If you keep the loan beyond 30 months, buying points saves you money. If you sell or refinance before then, the points were not worth it. Hold it the full 30 years and you are $32,511 ahead.
When points cannot pay for themselves
Break-even only means something if it lands inside the loan term. Pay $30,000 for a rate cut of 0.125% on that same $300,000 loan and the monthly saving is about $25, which needs 1,207 months to repay. The loan only runs 360. There is no point at which you come out ahead, and over the full term you are roughly $21,000 down. The calculator says so plainly rather than quoting a break-even date that arrives a century after the mortgage ends.
A useful sanity check: divide the cost of the points by the loan amount. Anything much above 2 or 3 points is unusual, and lenders offering a large point purchase for a small rate cut are worth a second look.
When Buying Points Makes Sense
- You plan to stay in the home long-term (well past the break-even point)
- You have the cash available and don’t need it for other investments
- Current rates are high and you expect to hold the mortgage for many years
When to Skip Points
- You may sell or refinance within a few years
- The cash could earn more invested elsewhere
- You need the cash for closing costs, repairs, or emergency fund
How we build and check this calculator
This calculator runs entirely in your browser, so the numbers you enter stay on your device. The math behind it is written by hand and tested against worked examples and standard references before the page goes live.
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