Mortgage Points Calculator

Buying 1 discount point on a $300,000 loan costs $3,000 upfront. At a typical 0.25% rate reduction per point, the rate drops from 6.5% to 6.25%, lowering the payment by $49.05 a month and breaking even after about 62 months — so the point only pays off if the loan is kept longer than roughly five years.

Tip: “Copy with settings” shares a link that opens this calculator with your numbers already filled in.

How this calculator works

Mortgage discount points are an upfront fee paid at closing in exchange for a lower interest rate for the life of the loan. One point costs 1% of the loan amount by definition; how much rate reduction that buys varies by lender and market conditions, so this calculator uses a typical figure you can change to match your own loan estimate.

Because the points cost money now and the payment savings arrive gradually every month, there is a breakeven point — the number of months of lower payments needed to recover the upfront cost. If you expect to keep the loan (without selling or refinancing) past that point, points tend to be worth it; if not, they can be a net loss, which the savings-over-horizon figure makes explicit.

The formula

Cost of points = loan amount × (points ÷ 100)Effective rate = base rate − (points × rate reduction per point)Monthly savings = payment at base rate − payment at effective rateBreakeven months = cost of points ÷ monthly savingsNet savings over horizon = (monthly savings × months in the loan) − cost of points

The rate reduction per point defaults to 0.25%, a commonly cited typical figure, but lenders set their own pricing — check your loan estimate for the actual reduction offered and change the field if it differs. Both payments use the standard amortization formula at their respective rates.

Worked example: $300,000 loan, 1 point, 0.25% reduction, 30-year term

Cost of 1 point = 300,000 × 1% = $3,000.
Effective rate = 6.5% − (1 × 0.25%) = 6.25%.
Payment at 6.5% is $1,896.20/month; at 6.25% it is $1,847.15/month — a savings of $49.05 a month.
Breakeven = 3,000 ÷ 49.05 ≈ 61.2, rounded up to 62 months; keeping the loan the full 30 years nets about $14,659 in savings after the upfront cost.

Frequently asked questions

Is 0.25% per point a guaranteed rate reduction?

No — it is a commonly cited typical figure, not a fixed rule. Actual pricing varies by lender, loan program, and market conditions, and can differ meaningfully from 0.25% per point. Always check the specific reduction shown on your loan estimate and enter that instead.

When are points a bad idea?

If you expect to sell the home or refinance the loan before the breakeven month, points usually cost more than they save, since you pay the full upfront cost but only collect part of the monthly savings. The savings-over-horizon field is built to catch exactly this case.

Are points tax deductible?

In the United States, mortgage points on a primary residence can sometimes be deductible, subject to IRS rules that depend on how the loan is used and other conditions. This calculator does not model tax effects — consult a tax professional for how points affect your specific situation.

Can I buy a fractional point, like 0.5?

Yes, many lenders allow fractional points, and this calculator supports them — the cost and rate reduction simply scale proportionally with the number of points entered.

Do points always lower the rate?

Standard discount points always reduce the rate; if a lender-provided reduction figure results in no real payment savings, this calculator flags that directly instead of showing a misleading breakeven number.