How is the break-even month calculated?

Break-even is the upfront cost of the points divided by the monthly payment savings. If one point costs $4,000 and you save $65 a month, break-even is about 61 months. It is shown only when the payment with points is actually lower.

What is the difference between discount points and lender credits?

Discount points are cash you pay at closing to lower the rate. Lender credits work in reverse: the lender helps with closing costs and you take a higher rate. This calculator models buying points. Credits show up as a negative number in Section J of a Loan Estimate.

Are mortgage points tax deductible?

Sometimes, and the rules are specific. Points paid to buy or improve a main home can often be deducted in the year you pay them if IRS tests are met. Points on a refinance are usually deducted over the life of the loan. This calculator does not apply a deduction. See IRS Publication 936 and a tax professional for your situation.

When do discount points not pay off?

When you leave the loan before break-even, when the rate cut is too small for the cost, or when you need the cash for something else. A planned sale, a refinance, or an adjustable-rate reset can all cut the holding period short.

How does refinancing change the picture?

If you refinance, the old loan ends. Any points you bought on that loan stop earning a monthly saving, and leftover undeducted refinance points may have their own tax rules. Enter a shorter holding period here if a refinance is likely, and use the refinance calculator to look at the new loan.

How much does one point usually lower the rate?

It depends on the lender, the loan, and the market. Quotes often fall around 0.125 to 0.25 percentage points per point, but that is a typical range, not a guarantee. Use the reduction printed on your Loan Estimate.

Can I share or download a calculation?

Yes. Use Share to copy a link that reopens the calculator with the same inputs, or Download to save the results as a text file.

Mortgage points calculator

Enter the loan amount, the base interest rate, the term, how many discount points you might buy, what each point costs, how much the rate falls per point, and how long you expect to keep the loan. The calculator shows the cash you pay at closing, both monthly payments, the savings, the break-even month, and a clear verdict for that holding period.

Written by Kenneth Schrøder, Founder of WiseCalcs

Updated October 23, 2026·Sources verified June 10, 2026

Use it to decide whether buying mortgage discount points is worth it. If you keep the loan past the break-even month, the lower payment can repay the upfront cost. If you sell or refinance sooner, you may lose money on the points.

Worth it at your holding period

Net savings at your holding period

$1,493.88

No points

$2,528.27

With points

$2,462.87

Holding period vs break-even

You keep the loan: 84 mo. Break-even: 62 mo.

Upfront cost of points: $4,000.00
Monthly payment without points: $2,528.27
Monthly payment with points: $2,462.87
Monthly savings: $65.40
Break-even month: 62 mo
Interest saved over full term: $23,545.19

The result updates as you type. The verdict says whether the points pay off in the years you entered. Net savings is what you keep after subtracting the cost of the points from the monthly savings over that period. The bars compare the two payments, and the track shows your holding period against break-even.

How does it work?

Both payments use the standard amortizing formula on the same principal and term. Break-even is shown only when the new payment is lower. Net savings at your holding period is monthly savings times the months you keep the loan, minus the upfront cost. The calculator does not look up rates, tax deductions, or lender quotes, and it is not financial advice.

Discount points cost and break-even

\text{cost}=P\cdot n\cdot\frac{c}{100},\quad i'=i-n\cdot d,\quad \text{break-even}=\frac{\text{cost}}{M_0-M_1}

P: Loan amount (the principal you borrow).
n: Number of discount points. Fractions such as 0.5 are allowed.
c: Cost of one point as a percent of the loan. One point is typically 1%.
i: Base annual interest rate before buying points.
d: Rate reduction per point, in percentage points. You enter the reduction your lender quoted.
i': Rate after points, never below zero.
M0: Monthly principal-and-interest payment at the base rate.
M1: Monthly principal-and-interest payment at the reduced rate.

A $400,000 loan at 6.5% for 30 years (360 months) has a payment of about $2,528.27. One point at 1% of the loan costs $4,000 and, at a 0.25 point rate cut, lowers the rate to 6.25%. The new payment is about $2,462.87, saving $65.40 a month. Break-even is 4,000 ÷ 65.40 ≈ 61 months. If you keep the loan 7 years (84 months), net savings are about $1,494. Over the full term you save about $23,545 in interest, before subtracting the $4,000 you paid for the point.

Method & sources

Discount points buy a lower rate. One point is typically 1% of the loan. The calculator prices the points you enter, builds two amortizing payments on the same principal and term — one at the base rate and one after the rate cut — then finds monthly savings, the break-even month, and whether you come out ahead in the years you expect to keep the loan.

Sources

Where this method comes from — use these references to understand the formula, assumptions, and limits.

How should I use lender credits and points (also called discount points)? — U.S. Consumer Financial Protection Bureau, verified 2026-10-23
What is an amortization schedule? — U.S. Consumer Financial Protection Bureau, verified 2026-06-10
Publication 936, Home Mortgage Interest Deduction — Internal Revenue Service, verified 2026-10-23

How we calculate

The loan is fully amortizing with a fixed rate and equal monthly payments of principal and interest only.
Upfront cost is loan amount × points × (cost per point as a percent of the loan). The default cost is 1% of the loan per point.
The reduced rate is the base rate minus points times the rate cut per point, and is never below zero.
Break-even divides the upfront cost by the monthly savings and is shown only when the new payment is lower.
Net savings at the holding period is monthly savings times the months you keep the loan, minus the upfront cost. It does not discount future savings.
Full-term interest saved compares the two loans if both run to the original term. It does not subtract the points cost.
You supply the rate, the cost per point, and the rate cut. The calculator does not look up lender quotes, tax deductions, or market rates.

Limitations

This is a planning comparison, not financial, tax, or legal advice. A lender's Loan Estimate is the figure that matters.
Tax, insurance, mortgage insurance, and other closing costs are not included.
The rate cut per point varies by lender, loan type, and market. Typical quotes often fall around 0.125 to 0.25 percentage points per point, but that is not a promise.
If you refinance or sell before break-even, you may not recover the cost of the points.
Whether points are tax-deductible depends on the loan and IRS rules. This calculator does not model a tax deduction.

Rounding

Money is rounded to two decimals for display. Break-even is rounded up to a whole month. The calculation uses full precision.

What this mortgage points calculator does

Discount points are an upfront fee you pay the lender to get a lower interest rate. One point is typically 1% of the loan amount — so one point on a $400,000 loan costs $4,000. You can buy a fraction of a point. This calculator compares a loan with no points to the same loan after the points you enter, then tells you how long the lower payment takes to repay that cash.

How to use it

Enter the loan amount, the base rate your lender quoted with no points, and the term in years.
Enter the number of discount points. Fractions such as 0.5 are allowed.
Leave cost per point at 1% of the loan unless your Loan Estimate shows a different price.
Enter the rate cut per point from that same quote. A common range is about 0.125 to 0.25 percentage points, but lenders differ.
Enter how many years you expect to keep this loan before you sell or refinance.
Read the upfront cost, both monthly payments, monthly savings, break-even month, and the verdict for your holding period.

A worked example

A $400,000 loan at 6.5% for 30 years has a monthly principal-and-interest payment of about $2,528. One discount point at 1% of the loan costs $4,000. If that point cuts the rate by 0.25 percentage points, the new rate is 6.25% and the new payment is about $2,463 — saving about $65 a month. The $4,000 cost breaks even in about 61 months, a little over five years. If you keep the loan seven years, you come out ahead by about $1,494. Over the full 30-year term you would save about $23,545 in interest, before counting the $4,000 you paid for the point.

What the result means

Net savings at your holding period is the number to watch. It is the monthly savings times the months you keep the loan, minus the cash you paid for points. A positive figure means the lower payment more than covers the cost in that time. A negative figure means you would still be behind if you left the loan then. Interest saved over the full term is a different question: it assumes you never sell or refinance, and it does not subtract the points cost.

Points versus lender credits

Points and lender credits are the same trade-off in opposite directions. Points mean you pay more at closing and get a lower rate. Lender credits mean the lender chips in toward closing costs and you accept a higher rate. This calculator models buying points. To sketch a credit, you can enter a higher rate and treat a negative cost as cash you did not have to bring to closing — but the Loan Estimate is still the document to compare.

Common mistakes

Using a generic 0.25% rate cut when your quote is smaller. A weaker cut stretches break-even.
Assuming you will keep the loan for 30 years. Many borrowers sell or refinance much sooner.
Forgetting that points are cash at closing. If that cash would otherwise pay down the loan or sit in savings, the true cost is not only the sticker price.
Counting a tax deduction as automatic. Deductibility depends on the loan and on IRS rules, and this calculator does not apply one.

When points don't pay off

Points are a poor deal when you will not keep the loan past break-even — a planned move, a likely refinance if rates fall, or an adjustable-rate period that ends soon. They also disappoint when the rate cut is thin relative to the cost, or when you would rather keep the cash for an emergency fund or for a larger down payment. The verdict line is built for that comparison: it is not a recommendation to buy or skip points.

When this calculator is useful

Comparing two Loan Estimates that differ mainly in points, checking whether a 0.5-point or 1-point buy-down is worth the extra cash, or stress-testing a shorter holding period if you might move or refinance. Pair it with the mortgage calculator for a full housing payment, the refinance calculator if replacing the loan is the other option, and the recast calculator if you have a lump sum and would rather lower the payment without changing the rate.

A note on advice

This page applies a standard payment formula to the numbers you type. It is not financial, tax, or legal advice, and it does not choose a loan for you. Compare the lender's own Loan Estimate and Closing Disclosure, and speak with a qualified professional if the decision is large or the tax treatment is unclear.

FAQ

How is the break-even month calculated?: Break-even is the upfront cost of the points divided by the monthly payment savings. If one point costs $4,000 and you save $65 a month, break-even is about 61 months. It is shown only when the payment with points is actually lower.
What is the difference between discount points and lender credits?: Discount points are cash you pay at closing to lower the rate. Lender credits work in reverse: the lender helps with closing costs and you take a higher rate. This calculator models buying points. Credits show up as a negative number in Section J of a Loan Estimate.
Are mortgage points tax deductible?: Sometimes, and the rules are specific. Points paid to buy or improve a main home can often be deducted in the year you pay them if IRS tests are met. Points on a refinance are usually deducted over the life of the loan. This calculator does not apply a deduction. See IRS Publication 936 and a tax professional for your situation.
When do discount points not pay off?: When you leave the loan before break-even, when the rate cut is too small for the cost, or when you need the cash for something else. A planned sale, a refinance, or an adjustable-rate reset can all cut the holding period short.
How does refinancing change the picture?: If you refinance, the old loan ends. Any points you bought on that loan stop earning a monthly saving, and leftover undeducted refinance points may have their own tax rules. Enter a shorter holding period here if a refinance is likely, and use the refinance calculator to look at the new loan.
How much does one point usually lower the rate?: It depends on the lender, the loan, and the market. Quotes often fall around 0.125 to 0.25 percentage points per point, but that is a typical range, not a guarantee. Use the reduction printed on your Loan Estimate.
Can I share or download a calculation?: Yes. Use Share to copy a link that reopens the calculator with the same inputs, or Download to save the results as a text file.