Mortgage Points Calculator — break-even on buying down your rate

How it works

Three steps. Cost: one point equals one percent of the loan amount (CFPB), so C = loan × points × 1%. Saving: the monthly payment is computed twice with the amortization formula M = P·r(1+r)ⁿ ⁄ ((1+r)ⁿ − 1) — once at the quoted rate, once at the rate reduced by points × the per-point reduction — and the difference is the monthly saving. Break-even: cost divided by monthly saving, rounded up to whole months. The per-point reduction is an assumption you set, defaulted to 0.25%, because CFPB notes the reduction depends on the lender, the kind of loan, and the overall mortgage market — sometimes larger, sometimes smaller. The lifetime outcome is signed: savings across the full term minus the upfront cost, which can be negative when the reduction is small.

Worked example

The cost step is the one CFPB publishes: one point on a $100,000 loan is one percent of the loan amount — $1,000. From there this calculator computes the rest: on the default $300,000 loan at 6.5%, one point costs $3,000, and at the 0.25%-per-point assumption it trims the rate to 6.25%, saving about $49 a month — a break-even at month 62, just past five years. Those savings figures are this calculator's own computation for these inputs and swing with the per-point reduction your lender actually quotes; only the one-percent cost rule is a published value (CFPB).

Frequently asked questions

What are discount points?

Prepaid interest on a mortgage: you pay more at closing in exchange for a lower interest rate for the life of the loan. Each point costs one percent of the loan amount (CFPB) — $3,000 on a $300,000 loan — and fractions of a point are common. Lender credits are the same trade in reverse: a higher rate in exchange for lower closing costs.

How much does one point lower my rate?

There is no fixed answer — CFPB notes the reduction depends on the specific lender, the kind of loan, and the overall mortgage market, and can be relatively large or small. That is why this calculator treats the per-point reduction as an assumption you set, defaulted to 0.25%; replace it with the actual quote from your loan estimate to get your real break-even.

How is the break-even calculated?

Upfront cost divided by monthly saving, rounded up. The cost is loan × points × 1%; the saving is the payment at your quoted rate minus the payment at the reduced rate, both from the standard amortization formula. If the points don't lower the payment at all, there is no break-even and the calculator says so rather than showing a number.

When do points make financial sense?

The arithmetic answer: when you keep the loan past the break-even month, the points have repaid their cost and everything after is saving; before it, they have not. How long you will actually keep the loan — through moves and refinances — is the judgment this page cannot make, which is why it reports the month rather than a recommendation.

What does the lifetime outcome mean?

The signed result of holding the loan to full term: the monthly saving times every month of the term, minus the upfront cost. It is the best case for the points — any earlier sale or refinance shrinks it — and it can be negative when the per-point reduction is too small to ever repay the one-percent cost.

Are points the same as an origination fee?

No. Discount points buy a lower rate and are optional; origination charges are what the lender charges to make the loan regardless. Both appear on your loan estimate, which is where to check what a point actually buys with your lender before comparing scenarios here.

How accurate is this, and what does it exclude?

The cost rule and payment arithmetic are exact; the per-point reduction is an assumption until you replace it with your lender's quote, and it is the number the whole answer hinges on. Excluded: tax treatment of points, investing the upfront cost instead, and rate-lock or lender-credit interactions — confirm the trade-off against your official loan estimate.