Mortgage Points Calculator
Calculate upfront discount point costs, monthly mortgage payment savings, and exact break-even timelines.
Mortgage Discount Points & Break-Even Calculator
Determine if buying discount points pays off based on your planned time in the home.
Side-by-Side Mortgage Comparison
How to Decide If Mortgage Discount Points Are Worth It
When closing on a home loan, borrowers often face the choice between a zero-point loan or paying cash at closing to buydown the interest rate. The decision boils down to your ownership horizon: will you keep the loan long enough for the cumulative monthly savings to surpass the upfront fee?
Mortgage Points Break-Even Formula
Break-Even (Months) = Total Cost of Points ÷ Monthly Payment Savings
Practical Buydown Applications
- ✓Forever Home Purchases
Determine massive lifetime interest savings when purchasing 1 to 2 discount points on a property you intend to own for 10+ years.
- ✓Mortgage Refinance Evaluation
Analyze whether paying upfront cash out-of-pocket for a lower refinance rate will recoup costs before your next expected move.
- ✓Seller-Paid Buydown Concessions
Calculate the permanent interest rate discount and monthly savings when using seller closing cost concessions to buy down your interest rate.
- ✓First-Time Homebuyer Cash Allocation
Weigh the financial tradeoff between using surplus cash to buy down mortgage interest rates versus keeping higher emergency cash reserves.
Key Calculator Features
Exact Break-Even Horizon
Computes the precise month and year when cumulative monthly savings overtake initial upfront closing cash outlays.
Custom Point & Discount Rates
Supports fractional points (e.g. 0.875 pts) and custom lender rate drop increments (e.g. 0.25% per point).
Horizon Net Profit Metric
Calculates net profit or loss based on your estimated time in the property before moving or refinancing.
Side-by-Side Zero Point Comparison
Examine monthly payments, total lifetime interest, and upfront costs side-by-side with zero ambiguity.
Frequently Asked Questions
What are mortgage discount points?
Mortgage discount points are fees paid directly to the lender at closing in exchange for a permanently reduced interest rate. One mortgage point costs 1% of your total loan amount (e.g., 1 point on a $400,000 mortgage costs $4,000) and typically lowers your interest rate by 0.25%.
How do I calculate the break-even point for discount points?
Divide the total upfront cost of the discount points by the monthly payment savings. For example, if 1.5 points cost $6,000 and save you $100 per month on your mortgage payment, your break-even point is $6,000 ÷ $100 = 60 months (exactly 5 years). If you stay in the home longer than 5 years, buying points saves you money.
Are mortgage discount points tax-deductible?
In many cases, yes. The IRS generally considers mortgage discount points to be prepaid mortgage interest. If you itemize deductions on Schedule A, points paid on a primary home purchase are often fully deductible in the year paid, while points on a refinance are deducted over the life of the loan. Consult your CPA.
When is buying mortgage points NOT a good idea?
Buying points is generally a poor financial decision if you plan to move, sell, or refinance within 3 to 5 years (before reaching the break-even point), or if paying for points depletes your emergency cash reserves.
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