Mortgage Points Calculator

Mortgage points, also called discount points, are an upfront fee you pay the lender at closing to permanently lower your interest rate for the life of the loan. One point costs 1% of the loan amount and typically reduces the rate by around 0.25%, though the exact reduction varies by lender and market. Buying points is sometimes called "buying down" the rate, and the decision comes down to a single question: will you keep the loan long enough for the monthly savings to outweigh the upfront cost?

The math is a break-even calculation. Suppose you have a $300,000 loan at 7%. Paying one point costs $3,000 and lowers the rate to about 6.75%, which might trim your monthly payment by roughly $50. Divide the $3,000 cost by the $50 monthly saving and you get a 60-month — five-year — break-even. Stay in the home and keep the loan beyond five years and you come out ahead; the savings keep accumulating for the rest of the term. Sell, refinance, or pay off the loan before five years and you've lost money on the points.

That makes the key factor not the points themselves but how long you'll hold the mortgage. Buyers who plan to stay put for decades often benefit substantially, because the savings compound over the full term — the lifetime saving can run into many thousands of dollars. People who expect to move within a few years, or who think rates may fall and prompt a refinance, usually shouldn't pay points, since they'd never reach break-even.

A few practical notes: points are most worthwhile when you have spare cash at closing that isn't better used elsewhere (such as a larger down payment to avoid mortgage insurance), and in some countries the cost of points may be tax-deductible, which can shift the calculation. Always compare the total cost of the loan with and without points over the period you realistically expect to keep it, rather than focusing on the headline rate alone. This calculator does exactly that, so you can decide with the break-even point in front of you.