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Mortgage Points Calculator

Find your breakeven period for mortgage discount points

Breakeven Period

5.0 years

Points Cost

$3,000

Monthly Savings

$50

Verdict

Worth It

$
%

1 point = 1% of loan amount. Each point typically reduces rate by 0.25%.

Buying Points Saves Money

5.0 yr breakeven

Points Cost

$3,000

Monthly Savings

$50

Rate Comparison

Rate Without Points7.000%
Rate With Points6.750%
Payment Without Points$1,996/mo
Payment With Points$1,946/mo

Total Cost (10-Year Stay)

Without Points$239,509
With Points (incl. cost)$236,495
Net Savings+$3,014

Frequently Asked Questions

Q

What are mortgage discount points?

A mortgage point equals 1% of your loan amount paid upfront to reduce your interest rate. Each point typically lowers your rate by 0.25%. On a $300,000 loan, 1 point costs $3,000 and reduces the rate from 7.0% to 6.75%, saving about $60/month.

  • 1 point = 1% of loan amount ($3,000 on a $300,000 loan)
  • Each point typically reduces rate by 0.25% (varies by lender)
  • Points are prepaid interest, tax-deductible in the year paid
  • You can buy fractional points (0.5, 1.5, etc.)
  • Not the same as origination points (lender fees)
Q

How do you calculate the breakeven period for mortgage points?

Breakeven months = Points Cost / Monthly Savings. Example: 1 point on $300,000 loan costs $3,000. Rate drops from 7.0% to 6.75%, saving $60/month. Breakeven = $3,000 / $60 = 50 months (4.2 years). You save money only if you stay past the breakeven point.

  • Formula: Breakeven = Total Points Cost / Monthly Payment Savings
  • $300K loan, 1 point ($3,000), saves $60/mo = 50-month breakeven
  • Typical breakeven: 3-7 years depending on loan size and points bought
  • Stay past breakeven = net savings; sell before = net loss
  • Consider opportunity cost: could the $3,000 earn more invested elsewhere?
PointsUpfront CostRate ReductionMonthly SavingsBreakeven
0.5 point$1,5000.125%~$30/mo~4.2 yr
1 point$3,0000.250%~$60/mo~4.2 yr
1.5 points$4,5000.375%~$89/mo~4.2 yr
2 points$6,0000.500%~$118/mo~4.2 yr
Q

When is it worth buying mortgage points?

Buying points is worth it when you plan to stay in the home past the breakeven point (typically 4-7 years), have extra cash beyond your down payment and closing costs, and interest rates are high enough that the reduction meaningfully lowers your payment.

  • Worth it: planning to stay 7+ years with a 4-year breakeven
  • Not worth it: moving in 3 years with a 5-year breakeven
  • Consider: Could the upfront cost earn more in a savings account?
  • At 7% rates, points save more per month than at 4% rates
  • Tax deduction of points may improve the effective return
ScenarioStay DurationBreakevenVerdict
First home, starter3-5 years4.2 yearsRisky / marginal
Long-term family home10+ years4.2 yearsWorth it
Refinance likely soon2-3 years4.2 yearsNot worth it
Retirement home15+ years4.2 yearsDefinitely worth it
Q

Are mortgage points tax deductible?

Yes, mortgage points are tax-deductible. For a primary home purchase, you can deduct the full amount in the year paid. For refinancing, points must be amortized over the loan term. Points on a $300,000 loan (1 point = $3,000) could save $720 in taxes at the 24% bracket.

  • Purchase: deduct full point cost in the year of purchase
  • Refinance: spread deduction over the life of the loan
  • 1 point on $300K = $3,000 deduction, saving $720 at 24% tax bracket
  • Must itemize deductions (not standard deduction) to claim
  • Seller-paid points are also deductible by the buyer
Q

How many points should I buy?

Most borrowers benefit from 0.5 to 1.5 points. Beyond 2 points, diminishing returns set in and breakeven extends. Run the numbers: if your breakeven is under 5 years and you plan to stay 10+, buying 1-2 points typically makes sense.

  • 0.5 points: modest savings, shorter breakeven, lower upfront cost
  • 1 point: the most common choice, good balance of savings vs cost
  • 1.5-2 points: larger savings but more cash needed upfront
  • Beyond 2 points: diminishing returns, longer breakeven
  • Compare: what would the point cost earn in a high-yield savings account?

Example Calculations

11 Point on $300,000 Loan (7.0% Rate, 30-Year)

Inputs

Loan Amount$300,000
Interest Rate7.0%
Discount Points1
Loan Term30 years
Planned Stay10 years

Result

Breakeven Period5.0 years
Points Cost$3,000
Monthly Savings$50
Net Savings (10 yr)$3,000

Points cost = $300,000 x 1% = $3,000. Rate drops from 7.0% to 6.75%. Payment without: $1,996/mo. Payment with: $1,946/mo. Savings = $50/mo. Breakeven = $3,000 / $50 = 60 months = 5.0 years. Over a 10-year stay: savings = $50 x 120 - $3,000 = $3,000 net savings.

22 Points on $400,000 Loan (6.5% Rate, 30-Year)

Inputs

Loan Amount$400,000
Interest Rate6.5%
Discount Points2
Loan Term30 years
Planned Stay15 years

Result

Breakeven Period4.2 years
Points Cost$8,000
Monthly Savings$131
Net Savings (15 yr)$15,564

Points cost = $400,000 x 2% = $8,000. Rate drops from 6.5% to 6.0%. Payment without: $2,528/mo. Payment with: $2,398/mo. Savings = $131/mo. Breakeven = $8,000 / $131 = 61 months = 5.1 years. Over 15 years: savings = $131 x 180 - $8,000 = $15,580 net savings.

Formulas Used

Points Cost

Points Cost = Loan Amount x (Points / 100)

The upfront cost of purchasing mortgage discount points.

Where:

Loan Amount= Total mortgage loan principal
Points= Number of discount points purchased (1 point = 1% of loan)

Breakeven Period

Breakeven Months = Points Cost / Monthly Payment Savings

The number of months before cumulative savings from the lower rate exceed the upfront cost of points.

Where:

Points Cost= Total upfront cost of purchased discount points
Monthly Payment Savings= Difference between monthly payment without and with points

Net Savings Over Stay

Net Savings = (Monthly Savings x Months Staying) - Points Cost

Total savings after subtracting the upfront cost of points, calculated over your planned stay duration.

Where:

Monthly Savings= Monthly payment reduction from buying points
Months Staying= Planned duration in the home (in months)
Points Cost= Upfront cost of discount points

Understanding Mortgage Discount Points

Mortgage discount points let you prepay interest upfront in exchange for a lower rate over the life of your loan. Each point costs 1% of the loan amount and typically reduces your rate by 0.25%, though the exact reduction varies by lender and market conditions.

The key question is whether the upfront cost is worth the monthly savings. Our calculator finds the breakeven period and compares total costs over your planned stay. If you sell or refinance before breaking even, you lose money on the points.

Consider points as part of your overall mortgage strategy. In high-rate environments, points can provide meaningful savings for long-term homeowners. In low-rate environments, the savings may not justify tying up cash that could be invested elsewhere.

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Last Updated: Mar 25, 2026

This calculator is provided for informational and educational purposes only. Results are estimates and should not be considered professional financial, medical, legal, or other advice. Always consult a qualified professional before making important decisions. UseCalcPro is not responsible for any actions taken based on calculator results.

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