"Buying points" means paying cash upfront to lower your mortgage rate. But is it worth it? This calculator shows what the points cost, how much you save each month, your break-even point, and your total savings over the life of the loan — so you can decide with real numbers.
Buydown break-even
Discount points are prepaid interest. Each point costs 1% of your loan amount and, in exchange, the lender shaves a bit off your interest rate — commonly around a quarter of a percentage point per point, though the exact amount varies by lender and market. On a $350,000 loan, two points would cost $7,000 upfront and might drop your rate from 6.75% to 6.25%. That lower rate means a smaller monthly payment for as long as you keep the loan, so the real question is simple: will the monthly savings eventually add up to more than the cash you spent? This calculator answers it by computing your break-even point — the number of months it takes for the savings to repay the cost of the points.
The break-even is the whole decision in a single number. If your break-even is, say, 70 months (just under six years) and you're confident you'll keep this mortgage and this house for longer than that, buying points likely makes sense — every month beyond break-even is pure savings, and over a full 30-year term the total can be substantial. But if there's a good chance you'll sell or refinance before break-even, you'd lose money: you'd have handed over the cash upfront without keeping the loan long enough to earn it back. Because most people move or refinance well before their loan's full term, the honest break-even horizon matters enormously.
A few things tilt the math. Points can be tax-deductible on a primary residence in many cases, which improves the deal for itemizers. The savings are also larger when rates are high and when your loan balance is big, since the percentage reduction applies to more money. On the other hand, that same upfront cash could instead go toward a larger down payment (cutting your loan and possibly eliminating PMI) or simply stay invested. There's no universally right answer — it hinges on how long you'll keep the loan and what else you'd do with the money. Run your real numbers above and let the break-even guide you.
Each point is prepaid interest costing 1% of the loan, typically lowering your rate about 0.25%.
Keep the loan past break-even and points win. Sell or refinance before it, and you lose money.
Points on a primary home are often tax-deductible, which can sweeten the deal if you itemize.
Discount points are prepaid interest: you hand the lender cash at closing in exchange for a permanently lower rate. One point costs 1% of the loan amount and typically buys somewhere between 0.125% and 0.25% off the rate, though the exchange rate varies by lender and market. The decision is a break-even problem identical in shape to refinancing — divide the cost by the monthly saving to get the months required to recover it. Points only pay off if you hold the loan past that point, which makes expected tenure, not the size of the discount, the deciding variable.
Cost of points = Loan amount × points × 1%Monthly saving = Payment at base rate − Payment at bought-down rateBreak-even months = Cost ÷ Monthly savingwhere:
Assumptions: Assumes you keep the loan without refinancing. Points are generally tax-deductible on a primary residence purchase in the year paid, which shortens the true break-even for itemisers.
A 30-year $400,000 loan is offered at 6.5%, or 6.25% if you pay one discount point.
ResultBreak-even at 61 months — worth it only if you stay past 5 years
Median US homeownership tenure sits near 12 years, so a 5-year break-even is comfortable for a typical buyer and poor for someone likely to relocate. Note also that refinancing resets the clock — points bought on a loan refinanced after 3 years are simply lost.