Mortgage Points Calculator: When Would You Break Even?
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When applying for a mortgage, you can purchase "discount" mortgage points upfront to buy down the interest rate and lower the monthly payment. Input a few factors in our mortgage points calculator to decide whether to buy points.
Example: How buying down the interest rate works
Mortgage points, also known as discount points, are optional fees paid upfront at closing to lower the interest rate and monthly payment. The cost of one point is 1% of the loan amount, and the lender typically cuts the interest rate by up to 0.25%.
Our rate buy down calculator determines the break-even point when the monthly savings from purchasing points equals the cost of buying them.
For example:
On a $300,000 loan, purchasing one point would cost $3,000.
Interest rate: Drops from 7% to 6.755%.
Monthly payment: Drops from $1,996 to $1,946.
Monthly savings: $50.
To calculate the break-even point: $3,000 up-front cost ÷ $50 saved per month = 60 months (5 years).
If you keep the mortgage past the break-even point, buying points could pay off. But there are other factors to consider. Perhaps you'd rather use the money for other purposes, like making a larger down payment, paying for home repairs or investing.
Nerdy Perspective
How did you decide if it's worth it to buy points?
We bought our first house in early 2024, when the 30-year fixed rate mortgage was hovering around 7%. We considered buying down the interest rate — a lower monthly payment was so tempting! — but after running the numbers, it was easy to see we wouldn't break even. First, we wanted to keep plenty of cash on hand to tackle repairs ASAP. Also, we planned to refinance within the first year or two, once we had built up home equity through renovations.
Should you buy down the interest rate or keep the cash?
Buying points could be helpful if:
✅ You have enough cash to make your desired down payment and still have some left for lowering the rate.
✅ You expect to keep the loan long enough that you’ll exceed the break-even point (meaning you won't move or refinance within a given time frame).
✅ You want to reduce the size of your monthly mortgage payment.
Buying points might not be worth it if:
🛑 You plan to sell the home or refinance before you’ve hit the break-even point.
🛑 You need the cash you’d use to buy points for something else.
🛑 The monthly savings are so small that it doesn’t make a meaningful dent in your budget (even if you reach the break-even point).
In a buyer's market, the seller may offer to pay for some or all of your mortgage points. Talk to your real estate agent to find out if this might be possible.
How to use the mortgage points calculator
To use the mortgage points calculator, type your information into these fields:
Desired loan amount.
Loan term (years).
Interest rate without points (shown as a percent). Not sure? Take a look at current mortgage interest rates to get an estimate.
Number of points. (This is required to deliver your results).
Interest rate with points. This shows your estimated rate after buying points. The mortgage points calculator assumes a 0.25% rate drop for each point purchased. If a lender has shown you a different rate, update this field to get accurate results.
When you apply for a mortgage, the lender has to give you a Loan Estimate within three business days. This form shows the full cost of your loan, including any mortgage points. Use it to compare offers from different lenders — it makes shopping around much easier.
Understanding your results
Break-even period (years). This shows how many years it will take before you’ve paid off the points you purchased and when you’ll start saving money from the lower interest rate.
Break-even period (months). This is the same break-even timeline, shown in months instead of years..
Payment required to buy points. Your cost to buy the number of points entered above. One point usually costs 1% of your loan amount. So on a $300,000 mortgage, one point would be $3,000.
Monthly savings with points. Once you pay off the cost of the points, this is how much you'll save each month.
Monthly mortgage payment with points. Your new, lower monthly payment after purchasing points.
Monthly mortgage payment without points. Your monthly payment if you don’t buy points. Use this to compare against the “with points” result To see how much you'd save in interest over the life of the loan, use our amortization calculator.
You still have to pay closing costs, whether you buy discount points or not. Closing costs run 2% to 6% of your loan amount. So if you're borrowing $300,000, closing costs will run about $6,000 to $18,000 before buying any points. Make sure to budget for both.