Mortgage Points Calculator

This mortgage points calculator shows if buying discount points saves you money. Enter loan amount and points to see break-even and monthly savings instantly.

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Loan Details
years
Rate Scenarios
%
points
%
years

One discount point costs 1% of your loan amount and typically lowers your interest rate by 0.25%. The break-even point is when monthly savings cover the upfront cost.

Points Analysis
💰 Break-Even Point: —
Cost of Points—
Base Rate (0 points)—
Reduced Rate (with points)—
Monthly Payment (No Points)—
Monthly Payment (With Points)—
Monthly Savings—
Break-Even Point—
Savings After 5 Years—
Savings After Your Stay (${document.getElementById('yearsInHome').value} yrs)—
Return on Investment (ROI)—
Cumulative Savings Over Time
YearPayment (No Points)Payment (With Points)Cumulative SavingsStatus

Enter loan details to view savings schedule.

Shows cumulative savings from buying points vs. paying points cost.

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Hasnain Khan

Co-Founder, Techraxy

Hasnain Khan is a digital tools developer and Co-Founder of Techraxy, a platform dedicated to building modern web-based calculators and utility tools. He focuses on tool optimization, website performance, and creating accessible user experiences across categories like automotive, finance, construction, and everyday utilities.

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Introduction to Mortgage Points Calculator

Mortgage discount points are prepaid interest that you pay upfront to lower your interest rate. One point costs 1% of your loan amount and typically reduces your interest rate by 0.25%. For example, on a $300,000 loan, one point costs $3,000 and might lower your rate from 6.5% to 6.25%. The question is whether paying points saves you money in the long run. This Mortgage Points Calculator helps you decide. You will see how much points cost, how much they lower your monthly payment, and your break-even point – the number of months it takes for your monthly savings to recover the upfront cost. If you plan to stay in your home beyond the break-even point, buying points makes financial sense. If you plan to move or refinance sooner, paying points may not be worth it. Toolraxy built this calculator to help borrowers make smart decisions about mortgage points.

How to Use This Mortgage Points Calculator

            1. Enter your Loan Amount (principal borrowed)

            2. Enter the Interest Rate Without Points (base rate offered)

            3. Select the Loan Term (15 or 30 years typical)

            4. Enter the Number of Points you are considering (1 point = 1% of loan amount)

            5. Enter any Additional Closing Costs (optional)

            6. Enter how many Years You Plan to Stay in the home

            7. Click Calculate to see if buying points makes sense

            8. Review your break-even point and total interest saved

Formula Section

Cost of points:

Points Cost = Loan Amount × (Number of Points ÷ 100)

Interest rate reduction (typical):

Rate Reduction = Number of Points × 0.25%

New interest rate with points:

New Rate = Base Rate – Rate Reduction

Monthly payment without points:

Payment Without = Loan Amount × [ r1(1+r1)^n ] / [ (1+r1)^n – 1 ]

Monthly payment with points:

Payment With = Loan Amount × [ r2(1+r2)^n ] / [ (1+r2)^n – 1 ]

Monthly savings:

Monthly Savings = Payment Without – Payment With

Break-even point (months):

Break-Even = Points Cost ÷ Monthly Savings

Break-even point (years):

Break-Even Years = Break-Even ÷ 12

Total interest saved over loan term:

Interest Saved = (Payment Without × n) – (Payment With × n)

Where:

  • r1 = Monthly interest rate without points (base rate ÷ 12 ÷ 100)

  • r2 = Monthly interest rate with points (new rate ÷ 12 ÷ 100)

  • n = Total months in loan term (years × 12)

  • 1 Point = 1% of loan amount (typically lowers rate by 0.25%)

Real-Life Examples Section

  • Example scenario:

    • Loan amount: $400,000

    • Base interest rate: 7.00%

    • Points considered: 2 points

    • Loan term: 30 years

    • Planned stay: 7 years

    Results:

    • Cost of 2 points (2% of $400,000): **$8,000**

    • Rate reduction (2 × 0.25%): 0.50%

    • New interest rate: 6.50%

    • Monthly payment (without points): $2,661

    • Monthly payment (with points): $2,528

    • Monthly savings: $133

    • Break-even point: $8,000 ÷ $133 = 60 months (5 years)

    • Total interest saved over 30 years: $47,880

    Decision based on planned stay (7 years):

    • Break-even is 5 years

    • Planned stay is 7 years (2 years beyond break-even)

    • Recommendation: Buy the points

    If planned stay was 3 years:

    • Break-even is 5 years

    • Planned stay is 3 years (would not reach break-even)

    • Recommendation: Do NOT buy points

    Clear takeaway: Buying 2 points costs $8,000 upfront but saves $133 per month. You break even in 5 years. If you stay longer than 5 years, points save money. If you move sooner, skip the points.

 

FAQs

1. What are mortgage discount points?
Mortgage discount points are prepaid interest that you pay upfront to lower your interest rate. One point costs 1% of your loan amount and typically reduces your rate by about 0.25%. Points are optional and can save money if you stay in the home long enough.

2. How much does one mortgage point cost?
One mortgage point costs 1% of your loan amount. On a $300,000 loan, one point costs $3,000. On a $500,000 loan, one point costs $5,000. The cost scales directly with your loan amount.

3. How much does one point lower my interest rate?
One point typically lowers your interest rate by 0.25% (25 basis points). However, the exact reduction varies by lender and market conditions. Some lenders may offer 0.20% to 0.30% per point.

4. What is the break-even point for mortgage points?
Break-even is the number of months it takes for your monthly savings to equal the upfront cost of points. Calculate by dividing points cost by monthly savings. For example, $3,000 cost ÷ $50 savings = 60 months (5 years).

5. Should I buy mortgage points?
Buy points if you plan to stay in your home beyond the break-even point. Skip points if you plan to move or refinance before break-even. Also consider if you have enough cash for points without depleting your down payment or emergency fund.

6. Are mortgage points tax deductible?
Yes, mortgage points are generally tax deductible as mortgage interest in the year you pay them if the loan is for your primary residence and the points are standard. Consult a tax professional for your specific situation.

7. Can I negotiate points with my lender?
Yes. Points are negotiable. You can ask your lender for different rate-point combinations. Some lenders may offer lower points or better rate reductions. Always compare multiple lenders.

8. What is the difference between origination points and discount points?
Origination points are fees for processing the loan (not tax deductible). Discount points are prepaid interest to lower your rate (tax deductible). This calculator focuses on discount points.

Disclaimer

This Mortgage Points Calculator is provided for educational and planning purposes only. Results are based on standard amortization formulas and assumed rate reductions (0.25% per point). Actual rate reductions vary by lender, loan amount, credit score, and market conditions. Points are not always available or beneficial. This tool does not constitute financial or mortgage advice. Consult a licensed mortgage lender or tax professional before purchasing mortgage points. Toolraxy is not responsible for any actions taken based on these calculations.

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