Mortgage Points Calculator
Calculate the upfront cost of buying mortgage discount points, the monthly savings, break-even period, and total interest saved over the loan term.
1 point = 1% of loan amount paid upfront
Typically 0.25% per point in 2026
Your Results
Enter loan details and click calculate.
What This Calculator Does
This mortgage points calculator helps borrowers evaluate whether buying discount points is a smart financial decision. Mortgage points (also called discount points) are upfront fees paid to the lender at closing to reduce the interest rate on your loan. Each point costs 1% of the loan amount and typically reduces the rate by 0.25%. This tool calculates the upfront cost, monthly payment savings, break-even period, and total interest saved over the full loan term.
The Formula
The cost of points is straightforward: each point equals 1% of the loan amount. Monthly payment savings come from the reduced interest rate applied over the full loan term. The break-even period is the number of months it takes for cumulative monthly savings to equal the upfront cost. Total interest saved is the difference in total interest paid over the full loan term with and without points.
Step-by-Step Example
Calculate point cost
On a $300,000 loan, 1 point costs $3,000 (1% of $300,000) paid at closing.
Find monthly savings
At 7.0% without points, monthly payment is $1,996. At 6.75% with 1 point, payment is $1,946. Monthly savings: $50.
Determine break-even period
$3,000 upfront cost divided by $50 monthly savings equals 60 months, or 5 years to break even.
Calculate total interest saved
Over 30 years, the lower rate saves approximately $17,920 in total interest. Net savings after the $3,000 point cost: $14,920.
Real-World Use Cases
Long-Term Homeowner
If you plan to stay in the home for 10+ years, buying points often saves significant money over the life of the loan.
Investment Property Analysis
Calculate whether points reduce monthly payments enough to improve cash flow on a rental property.
Refinance Decision
When refinancing, compare the cost of buying points against keeping the higher rate, factoring in how long you plan to keep the new loan.
Common Mistakes to Avoid
Buying points when you plan to sell or refinance before the break-even period. If you move in 3 years but break-even is 5 years, you lose money on the points.
Confusing discount points (which lower the rate) with origination points (which are lender fees that do not reduce the rate).
Not comparing the opportunity cost. The $3,000 spent on points could alternatively be used for a larger down payment or invested elsewhere.
Assuming the rate reduction is always 0.25% per point. The actual reduction varies by lender and market conditions.
Frequently Asked Questions
Accuracy and Disclaimer
This calculator provides estimates based on standard amortization. Actual rate reductions per point vary by lender and market conditions. Tax deductibility of points depends on your specific tax situation. Consult your lender for exact rate sheet pricing.
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