When you get a mortgage, most lenders will lower your interest rate if you pay extra at closing. That up-front payment is called discount points. Whether it is a good deal depends almost entirely on how long you keep the loan. This mortgage points calculator compares the loan with and without points, finds the month the lower payment repays what you spent, and shows your net gain or loss for the time you expect to hold the mortgage.
How to use the mortgage points calculator
- Enter the loan amount and term.
- Enter the rate with no points and the rate with points from your lender’s quotes.
- Enter the number of points and the cost per point, usually 1% of the loan.
- Enter how long you expect to keep the loan before selling or refinancing.
How points are evaluated
The cost of points is paid once, at closing:
Each month, the lower rate saves the difference between the two payments, and the simple break-even is:
The calculator also tracks the loan balance under both rates. With a lower rate, more of every payment reduces principal. That extra equity is real money when you sell or refinance, so the break-even including equity is the more complete answer.
Worked example
On a $320,000, 30-year loan, a lender quotes 6.75% with no points or 6.5% with one point ($3,200).
- Payments: $2,075.51 vs. $2,022.62, a saving of $52.90 a month.
- Simple break-even: $3,200 ÷ $52.90 = 60.5 months, or 5 years, 1 month.
- Counting faster principal paydown: about 4 years.
- If you keep the loan 10 years, you come out $4,827 ahead. If you hold it all 30 years, you save $15,843 after the cost of the point.
| Keep the loan | Payment savings | Extra equity | Net after the $3,200 cost |
|---|---|---|---|
| 3 years | $1,904 | $505 | −$791 |
| 5 years | $3,174 | $847 | $821 |
| 7 years | $4,443 | $1,188 | $2,431 |
| 10 years | $6,348 | $1,680 | $4,827 |
| 15 years | $9,521 | $2,356 | $8,677 |
When buying points makes sense
- You’ll stay put. The longer you keep the loan, the more months of savings you collect.
- Rates are unlikely to fall. If you might refinance when rates drop, points paid today may never earn back their cost.
- You have spare cash. Money spent on points can’t go toward a bigger down payment, an emergency fund or closing costs. A larger down payment can also lower PMI.
- The seller is paying. Seller concessions put toward points can permanently cut your rate at no cost to you.
The reverse also exists. Lender credits, sometimes called negative points, give you cash toward closing costs in exchange for a higher rate. That can make sense if you expect to move or refinance within a few years. Run the numbers backward with this calculator by treating the credit as the cost and the higher payment as the savings.
To see your full monthly payment, use the mortgage calculator. The APR calculator shows how points raise a loan’s APR above its note rate, and the closing costs calculator puts points in context with the rest of your cash to close.
Estimates only, not financial or tax advice. Rate reductions per point differ by lender and day; compare official Loan Estimates.
Frequently asked questions
What are mortgage points?
Discount points are prepaid interest you pay at closing in exchange for a lower interest rate for the life of the loan. One point costs 1% of the loan amount, so on a $320,000 loan one point is $3,200. How much each point lowers the rate varies by lender and market, often around 0.25 percentage points.
How do I calculate the break-even on points?
Divide the cost of the points by the monthly payment savings. In the default example, $3,200 ÷ $52.90 = 60.5 months, a little over five years. If you sell or refinance before then, the points cost more than they saved.
Why are there two break-even figures?
The simple break-even counts only payment savings. A lower rate also means more of each payment goes to principal, so your loan balance falls faster. Counting that extra equity, the default example breaks even after about four years instead of five.
Are mortgage points tax-deductible?
Often, if you itemize. IRS Publication 936 allows points paid on a loan to buy or build your main home to be deducted in the year paid when several conditions are met. Points on a refinance are generally deducted over the life of the loan. With the 2026 standard deduction at $16,100 for single filers and $32,200 for joint filers, many buyers get no tax benefit.
Are points the same as origination fees?
No. Origination fees pay the lender for processing and don't lower your rate. Discount points buy a lower rate. Both appear in Section A of your Loan Estimate, so look for the line that says points and the rate it buys.