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Mortgage Points Calculator

Updated · By the CalculatorDash editorial team · How we check our maths

Quick answer

One discount point costs 1% of the loan and typically lowers the rate by about 0.25%. On a $350,000 30-year loan, paying 2 points ($7,000) to go from 6.75% to 6.25% saves about $115 a month, so it breaks even after roughly five years.

Should you buy points?

$
%
points
%
years

Break-even point

61 months

Cost of points
$7,000
Monthly saving
$115.08
Net gain if you keep the loan that long
$6,810

Negative means the points cost more than they save.

How this calculator works

Discount points are prepaid interest. You pay a percentage of the loan at closing and the lender gives you a lower rate for the life of the loan. Whether that is a good deal depends almost entirely on how long you keep the mortgage.

This calculator compares the two monthly payments, divides the upfront cost by the monthly saving to get the break-even point in months, and shows the net gain or loss over the number of years you expect to keep the loan before selling or refinancing.

If rates are likely to fall and you might refinance in a couple of years, points rarely pay off. If you plan to stay in the home and keep the loan for a long time, they can save a lot.

The formula

Cost of points
loan × points ÷ 100
Monthly saving
payment at the higher rate − payment at the lower rate
Break-even
cost of points ÷ monthly saving

Worked example

On $350,000 over 30 years, 6.75% costs about $2,270 a month and 6.25% about $2,155, a saving of about $115. Two points cost $7,000, so break-even is about 61 months. Keeping the loan 10 years nets about $6,800 after the cost of the points.

Tips

  1. 01Get the lender's rate sheet so you can see exactly how much each point lowers the rate; it varies.
  2. 02Ask the seller to pay points as a concession; it is often worth more to you than the same price cut.
  3. 03In the US, points on a purchase loan may be tax deductible in the year you pay them.

Frequently asked questions

How much does one mortgage point lower the rate?

Often around 0.25%, but it varies by lender and market. Always compare actual quotes.

Are mortgage points worth it?

They are worth it if you keep the loan longer than the break-even period, typically four to seven years.

What is the difference between discount points and origination points?

Discount points buy a lower rate. Origination points are a fee for processing the loan and don't lower the rate.