Mortgage Points Calculator

How to use this calculator

1. Enter the Loan amount, the Interest rate without points and the Loan term.
2. Enter Points bought (one point costs 1% of the loan).
3. Set the Rate cut per point your lender quotes, often around 0.25%.
4. Read the Break-even point, Monthly savings and Lifetime savings after cost.

How points are evaluated

Each point costs 1% of the loan. The lender lowers your rate by the amount you enter per point. The calculator computes the monthly payment at both rates and divides the upfront cost by the monthly saving to find the break-even month.

Break-even months = (Loan × Points ÷ 100) ÷ (Payment without points − Payment with points)

• Loan × Points ÷ 100 = upfront cost of the points
• Payment = P · r(1 + r)^n / ((1 + r)^n − 1) at each interest rate
• New rate = original rate − (points × rate cut per point)

If you keep the loan longer than that, the points pay for themselves; if you sell or refinance sooner, you lose money.

Example: two points on a $300,000 loan

At 7% for 30 years, the payment is $1,996. Buying two points at 0.25% each costs $6,000 and drops the rate to 6.5%, so the payment falls to $1,896, a saving of $99.70 a month. You break even after 61 months, and over the full 30 years you save about $29,893 after cost.

One point ($3,000) takes the rate to 6.75%, saves $50.11 a month and breaks even after 60 months, with lifetime savings of about $15,041.

How to decide

The key question is whether you will keep this exact loan past the break-even month. Five years is a long time for many homeowners: people move, refinance when rates fall, or pay off early. If any of those is likely, points are a gamble.

Compare against putting the same cash toward a bigger down payment with the down payment calculator, or against refinancing later with the refinance calculator. Also ask the lender for the price of each point; the 0.25% per point figure is only a typical illustration.

Common mistakes

• Buying points on a loan you plan to refinance within a few years.
• Using up your emergency cash to pay for points.
• Comparing offers without asking whether lower-rate quotes include points.
• Forgetting that points can be negotiated and sometimes are tax-deductible, which you should confirm with a tax professional.
• Ignoring the opposite option: lender credits, which raise the rate in return for lower closing costs.

Assumptions and limits

The calculator assumes a fixed rate for the whole term and a constant rate cut per point. It does not account for the time value of the cash spent, tax treatment, mortgage insurance or the opportunity cost of using that money elsewhere.

Use the Loan Estimate to compare exact offers from different lenders.

Frequently asked questions