Mortgage Points Calculator
Decide whether paying discount points to lower your rate is worth the upfront cost — and how long until it pays off.
A worked example
Running this tool on current national benchmarks (Federal Reserve / Freddie Mac via FRED (St. Louis Fed)) — swap in your own numbers to see how the result moves.
- Loan amount
- $300,000
- Loan term (years)
- 30
- Rate without points
- 6.75%
- Discount points
- 2
- Rate reduction per point
- 0.25%
$6,000 buys down your rate to 6.25%
- Cost of points$6,000
- New rate6.25%
- Monthly saving$98.64
The math behind it
Buying points costs your loan amount times the number of points as a percent — one point is 1% of the loan. Each point lowers your rate by the reduction you set (about 0.25% is typical), giving a new, lower rate. The calculator amortizes the loan at both the original and reduced rates, and the gap between the two monthly payments is your monthly saving. The break-even is the cost of the points divided by that monthly saving; keep the loan past that point and the lifetime saving turns positive.
What each input means
- Discount points
- One point costs 1% of the loan and typically lowers the rate ~0.25%.
Assumptions & limits
- One point equals 1% of the loan amount, paid upfront at closing.
- The rate reduction per point is an input, not a fixed market value — real buydowns vary by lender and day, and are often around a quarter percent.
- The break-even ignores the time value of money and any tax treatment of points; it is a simple cost-divided-by-monthly-saving figure.
- It assumes you keep the loan and rate unchanged — refinancing or selling before break-even forfeits the remaining benefit.
- A single fixed interest rate is assumed for the term.
How mortgage points work
| Term | Meaning |
|---|---|
| 1 discount point | Costs 1% of the loan amount |
| Typical rate cut | About 0.25% per point (varies) |
| Break-even | Points cost divided by monthly saving |
Source: Freddie Mac PMMS via FRED. Annual averages; latest weekly reading shown.
Common questions
How many points are worth buying?
It depends entirely on how long you keep the loan. Points pay off only if you hold the mortgage past the break-even month shown in the results. If you expect to move or refinance soon, few or no points make sense; if you will stay for the long haul, buying down the rate can save meaningfully.
What is the break-even point on discount points?
It is the number of months of lower payments needed to recover the upfront cost of the points. The calculator divides the points cost by the monthly saving. Past that month, every payment at the lower rate is pure saving.
Are mortgage points tax-deductible?
Points paid to buy down the rate on a home purchase are often deductible, sometimes in the year paid and sometimes spread over the loan, depending on the situation. This calculator does not model taxes — confirm the current rules and your own eligibility with a tax professional.