Mortgage Points Calculator

Paying now to save later — when the trade pays off

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.