What are mortgage points?

Mortgage points (discount points) are upfront fees paid to reduce your interest rate. Each point costs 1% of the loan amount and typically reduces your rate by 0.25%. On a $400,000 loan, 1 point = $4,000 upfront.

How do I calculate the break-even period?

Break-Even = Upfront Cost ÷ Monthly Savings. If you pay $8,000 for points and save $100/month, break-even is 80 months (~6.7 years). If you sell or refinance before then, you lose money on the points.

Are mortgage points tax deductible?

Yes, in many cases. Points paid on a primary home purchase are typically fully deductible in the year paid if you itemize deductions. Points paid on refinancing must be deducted ratably over the life of the loan.

Should I buy points if I plan to sell in 5 years?

Probably not. If your break-even is 7 years and you sell in 5, you lose money. The longer you stay in the home, the more beneficial points become.

Mortgage Points Calculator — Is Buying Points Worth It?

Calculate the break-even period for buying mortgage discount points. Compare 0, 1, and 2 points side by side and see if buying points saves money based on how long you keep the loan.

Loan Amount

Current Interest Rate

Rate Reduction per Point ?

Points to Buy ?

Loan Term (years)

Upfront Cost of Points

—

Monthly Payment Savings —

Break-Even Period —

Total Savings Over Loan Life —

Extended More scenarios, charts & detailed breakdown ▾

Loan Amount

Rate Without Points

Rate With Points

Total Points Cost ?

Loan Term

Monthly Savings

—

Break-Even (months) —

Break-Even (years) —

Net Savings Over Loan Life —

Professional Full parameters & maximum detail ▾

Loan Amount

Rate Without Points

Rate With Points

Number of Points

Loan Term (years)

Expected Years Before Selling ?

yrs

Points Tax Deductible?

Marginal Tax Rate

Alt. Investment Return (opportunity cost) ?

Upfront Cost of Points

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After-Tax Cost of Points —

Monthly Payment Savings —

Break-Even Period —

Net Savings/Loss If Selling Early —

Opportunity Cost (invested instead) —

NPV of Savings (vs opportunity cost) —

Recommendation —

How to Use This Calculator

Enter your Loan Amount, Current Rate, and Points to Buy.
Adjust the rate reduction per point (default 0.25%).
View the Break-Even Period — if you keep the loan longer, points are profitable.
Use the Compare 0/1/2 Points tab to see all scenarios side by side.
Use the Professional tab for tax deductibility, opportunity cost, and early-sale loss.

Formula

Point Cost = Loan Amount × Points ÷ 100
Monthly Savings = Payment(old rate) − Payment(new rate)
Break-Even = Point Cost ÷ Monthly Savings
Net Savings = Monthly Savings × Loan Term Months − Point Cost

Example

Example: $350,000 loan at 7.0%. Buy 2 points for $7,000 to reduce rate to 6.5%. Old payment: $2,329/mo. New payment: $2,212/mo. Monthly savings = $117. Break-even = $7,000 ÷ $117 = 60 months (5 years). If you stay 30 years, total savings = ~$35,000.

Frequently Asked Questions

Mortgage points (discount points) are upfront fees paid to reduce your interest rate. Each point costs 1% of the loan amount and typically reduces your rate by 0.25%. On a $400,000 loan, 1 point = $4,000 upfront.
Break-Even = Upfront Cost ÷ Monthly Savings. If you pay $8,000 for points and save $100/month, break-even is 80 months (~6.7 years). If you sell or refinance before then, you lose money on the points.
Yes, in many cases. Points paid on a primary home purchase are typically fully deductible in the year paid if you itemize deductions. Points paid on refinancing must be deducted ratably over the life of the loan.
Probably not. If your break-even is 7 years and you sell in 5, you lose money. The longer you stay in the home, the more beneficial points become.

Related Calculators

Sources & References (5) ▾

CFPB — What are discount points and lender credits? — Consumer Financial Protection Bureau
IRS — Topic 504: Home Mortgage Points — Internal Revenue Service
Freddie Mac — Mortgage Points and Rate Buydowns — Freddie Mac
HUD — Mortgage Points Guidance — U.S. Department of Housing and Urban Development
CFPB — Closing Disclosure Explainer — Consumer Financial Protection Bureau