Mortgage Points Calculator

Background.

A lender offers you 7.5 percent with no points, or 7.0 percent if you pay two points at closing. On a $400,000 loan those two points cost $8,000 in cash, and they cut the monthly payment by $135.65. Whether that is a good trade comes down to one question: will you keep this loan for more than 59 months?

That break-even month is the number to compare with your own plans. Before it, you have spent more on points than the lower payments have given back; after it, every month is profit. Buyers who expect to stay put for ten years and keep the same mortgage tend to come out ahead. Buyers who might move for a job, or who would refinance the moment rates drop, often do not. Points pay off best if rates stay level or rise, because a fall in rates is exactly what tempts you to refinance and throw away the rate you paid for.

The arithmetic is the standard fixed-rate payment formula run twice, once at the base rate and once at the bought-down rate. One point costs 1 percent of the loan amount, and the lender decides how much each point lowers the rate. Dividing the cost of the points by the monthly saving gives the break-even, and multiplying the saving by the months you expect to hold the loan, less the cost, gives the net saving.

Keep three simplifications in mind. The comparison counts payments only, so it leaves out the extra principal a lower rate pays down, which makes points look slightly worse than they are. It does not discount future savings, which makes them look slightly better. And it ignores taxes: under IRS Publication 936, points can be deductible as mortgage interest, but only if you itemize and meet the conditions.

What is mortgage points calculator?

Discount points are prepaid interest. You pay the lender a lump sum at closing, quoted as a percentage of the loan amount, and in return the lender lowers the interest rate for the life of the loan. One point is 1 percent of the amount borrowed, so on a $400,000 mortgage a point costs $4,000 and two points $8,000. How far each point lowers the rate is not fixed: it comes from the lender's pricing for that day, loan type and lock period. On the standard Loan Estimate, points appear in the Origination Charges section as a percentage of the loan amount, which is where to read both the cost and the rate it buys. The mirror image is a lender credit, where you accept a higher rate in exchange for money toward closing costs.

How to use this calculator.

1. 01Enter the loan amount, the sum you are borrowing rather than the purchase price, since points are charged as a percentage of the loan.
2. 02Enter the base interest rate the lender quotes with no points, taken from the same lender on the same day for the same loan, so that the only difference between the two offers is the points.
3. 03Enter the number of discount points and the rate reduction each one buys, written in percentage points: 0.25 means a quarter of a percentage point, or 25 basis points. If the quote is 7.5 percent with no points or 7.0 percent with two, the reduction is 0.5 ÷ 2 = 0.25. Fractional quotes such as 0.375 or 1.125 points are common, and the points field moves in eighths.
4. 04Enter the years you expect to keep this particular loan, which ends when you sell, refinance or pay it off, whichever you think comes first. If you enter more years than the loan term, the calculator counts only the term, because payments stop when the loan is repaid.
5. 05Enter the loan term in years, usually 30 or 15, and compare the break-even months with the years you entered. A negative net saving means the points cost more than they returned over that period.

The formula.

The monthly payment on a fixed-rate loan is M = P × r ÷ (1 − (1 + r)⁻ⁿ), where P is the loan amount, r the monthly rate (the annual percentage divided by 1,200) and n the number of monthly payments, 12 times the term. It is calculated twice: M₀ at the base rate and M₁ at the reduced rate, which is the base rate minus points × reduction per point and is never allowed below zero. The cost of the points is C = P × points ÷ 100.

Break-even t = C ÷ (M₀ − M₁), in months. It is left as a fraction, so 58.98 means the cost is recovered during the 59th payment. If the points buy no saving at all, including the case of zero points, the break-even is shown as 0. Over the H months you expect to hold the loan, total cost without points = M₀ × H, total cost with points = C + M₁ × H, and net savings = (M₀ − M₁) × H − C.

Three assumptions sit inside those lines. Payments are compared, not wealth: when you sell or refinance, the lower-rate loan has a smaller balance left, and that difference is not counted, so the real benefit of points is somewhat larger than shown. Savings are not discounted for the return the cash could have earned elsewhere, which pushes the other way. In the worked example, counting the lower balance would bring the break-even forward to about month 48, while discounting the savings at 4 percent a year would push it out to month 66. H is cut off at the end of the loan: if you enter more years than the term, only the payments that exist (12 times the term) are counted.

The break-even depends on the size of the rate cut relative to the cost and on the term, but not on the loan amount: doubling the loan doubles both the cost of the points and the monthly saving, leaving the months unchanged.

A worked example.

Frequently asked questions.

References& sources.

1. [1]CFPB (2023). "How should I use lender credits and points (also called discount points)?"
2. [2]IRS (2025). "Publication 936, Home Mortgage Interest Deduction."
3. [3]CFPB (2024). "How does paying down a mortgage work?"
4. [4]CFPB (2024). "What fees or charges are paid when closing on a mortgage and who pays them?"
5. [5]FTC (2025). "How To Get Out of Debt."