Mortgage Points Calculator — Should You Buy Points?
Discount points lower your interest rate in exchange for cash at closing. Find out how long it takes to earn that money back and whether buying points pays off for how long you expect to keep the loan.
Break-even
How to use the mortgage points calculator
- Enter the loan amount, the rate you would get with no points, and the term.
- Enter how many points the lender offers and how much each point lowers the rate. Your loan estimate lists both.
- Enter how long you expect to keep the loan before selling or refinancing.
How mortgage points work
One discount point costs 1% of the loan amount and typically lowers the rate by around 0.25%, though the exact reduction varies by lender and market. On a $350,000 loan, two points cost $7,000.
The break-even point is the cost of the points divided by the monthly payment savings. If you keep the loan longer than that, the points pay off; if you sell or refinance sooner, you lose money. Rates that may fall soon make points riskier, because a refinance would wipe out the benefit.
This comparison ignores investment returns you could earn on the cash instead, and tax effects. Points paid on a purchase mortgage are often deductible if you itemize. Compare offers on the Loan Estimate, where points appear as "% of loan amount (points)".
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Frequently asked questions
How much does one point lower the rate?
Commonly about 0.25%, but it can range from roughly 0.125% to 0.375% depending on the lender and market.
Are mortgage points worth it?
Usually only if you keep the loan beyond the break-even point, often 5 to 8 years, and do not expect to refinance soon.
What is the difference between discount points and origination points?
Discount points buy a lower rate; origination points are a lender fee that does not lower the rate.
Can the seller pay for points?
Yes. Seller concessions can often be used to buy points, within loan program limits.