Mortgage Points Calculator

What is a mortgage point?

A mortgage point — formally a discount point — is prepaid interest. It is a fee equal to 1% of your loan amount, paid to the lender at closing in exchange for a lower interest rate. One point on a $400,000 loan costs $4,000. The working convention is that each point buys about 0.25% of rate, so one point takes 6.50% down to 6.25% and two points take it to 6.00%. On a 30-year schedule that 0.25% is worth $65.40 a month, or $784.80 a year, for as long as the loan is outstanding.

Not everything quoted in points buys a rate cut. Discount points are prepaid interest and they do lower your rate. Origination points are a fee for underwriting and processing, expressed in the same units but buying nothing in return. Your Loan Estimate separates the two into a Discount Points line and an Origination Charges line, and the distinction matters: one point on this loan is $4,000 either way, but only one of them ever comes back to you in the form of a smaller payment.

The trade is a fixed cost against a recurring saving, so the entire decision comes down to how many months it takes for the collected savings to equal the amount paid up front. That number is your break-even point, and it is what this calculator produces. On the example worked throughout this page — $400,000 at 6.50%, one point at $4,000 — monthly savings are $65.40 and break-even lands at 61 months, five years and one month. Points are settled in cash at closing rather than financed, which means they compete for the same dollars as your down payment, your escrow prepaids, and your post-closing cash reserve.

Two tax rules are worth knowing before you sign. Discount points on a purchase mortgage are generally deductible as mortgage interest in the year you pay them, which is one reason some buyers like to close early in a tax year. Points paid on a refinance are instead deducted ratably over the life of the new loan. Origination points are a fee and are not deductible as interest in either case. The deduction only helps if you itemize, and it reduces tax by your marginal rate rather than dollar for dollar — $4,000 of points in the 22% bracket is worth about $880 of tax relief, not $4,000.

How to use this calculator

1. Enter the home price and your down payment. The loan amount is the difference — on a $500,000 home with $100,000 down, you are borrowing $400,000.
2. Confirm the loan term, 30 years (360 months) for a standard fixed-rate mortgage.
3. Enter the base interest rate you were quoted with no points bought. Current market quotes are listed on the mortgage rates page.
4. Enter how many points you want to buy. One point costs 1% of the loan amount — $4,000 on $400,000 — and the calculator prices it for you.
5. Calculate to see whether you should buy points, the discounted rate, the new monthly payment, monthly savings, break-even in months, and your net gain or loss over the term.

A realistic set of inputs for 2026: home price $500,000, down payment $100,000 (a $400,000 loan), a 30-year term, a base rate of 6.50% (the benchmark used in every figure on this page), and 1 point to buy. The calculator prices that point at $4,000, drops the rate to 6.25%, shows total cash needed of $104,000, and reports monthly savings of $65.40, a break-even of about 61 months, and total savings over the full term of roughly $19,545. If your lender quotes a different rate on the day you apply, substitute it — the arithmetic in the next section shows how to redo every step by hand. Then check break-even against your own hold period: a 61-month break-even is a bad trade if you may sell in four years. If you are weighing points against a larger down payment instead, size the cash side first with the down payment calculator, then bring the number back here.

How mortgage points are calculated

Three quantities drive the result: what the points cost, what the payment is without them, and what the payment is with them. Written out, the rule is a single division.

Break-even (months) = total point cost ÷ monthly payment savings

The monthly savings come from the same amortization formula used everywhere else on this site, run twice — once at the quoted rate and once at the discounted rate.

Worked example: one point on a $400,000 loan at 6.50%

Step 1: one point costs 400,000 × 1% = $4,000. Step 2: the payment at 6.50% over 360 months is $2,528.27. Step 3: the payment at 6.25% over 360 months is $2,462.87. Step 4: monthly savings = 2,528.27 − 2,462.87 = $65.40. Step 5: break-even = 4,000 ÷ 65.40 = 61.2 months, which rounds to 61 months — five years and one month. Step 6: over the remaining life of the loan, 65.40 × 360 = $23,545 of interest is not paid, against the $4,000 spent, for a net benefit of $19,545.

Break-even barely moves as you buy more points, because each point costs 1% and buys roughly the same 0.25%. One point breaks even at 61.2 months, two points ($8,000 saving $130.07 a month) at 61.5 months, and three points ($12,000 saving $193.98 a month) at 61.9 months. What changes is the size of the wager: three points commit $12,000 of closing cash to a bet that resolves at roughly the same time. That is why hold period, not point count, is the variable that actually decides the question.

Worked scenarios

Two questions decide this purchase: how many points to buy, and how long you will hold the loan. The first table prices the options on one $400,000 loan starting at 6.50%; the second tracks a single point across different holding periods; the third compares points against the same cash added to the down payment.

Point options on a $400,000, 30-year loan at 6.50%

Lifetime interest falls from $510,178 at 6.50% to $486,633 with one point, $463,353 with two, and $440,345 with three — reductions of $23,545, $46,825, and $69,833 against upfront costs of $4,000, $8,000, and $12,000. Net benefit over the full 360 payments is therefore $19,545, $38,825, and $57,833. The relationship is close to linear by design: more points buy more rate, and each point returns about the same ratio of saving to cost.

Hold period: what one $4,000 point does over time

The line crosses zero at month 61, exactly where the formula put it. Until then the point is money you have lent your lender at a negative return — leave at month 36 and you are $1,646 behind. After month 61 the original $4,000 is fully recovered and every further month adds $65.40 of pure saving. This is why the honest version of the question is never "are points a good deal" but "when would I realistically stop paying this loan."

$4,000 toward points versus $4,000 toward the down payment

The same $4,000 leaves your account in both of the first two rows, so the comparison is clean. Points win on payment by $40.12 a month and win on lifetime interest by $18,443, but they add nothing to your equity. The down payment route adds $4,000 of equity and still saves $5,102 of interest. One circumstance flips the answer outright: if that $4,000 pushes your down payment to 20% of the purchase price, it removes mortgage insurance, and PMI on a loan this size commonly runs $167 to $500 a month — more than either strategy delivers. Check the threshold with the PMI calculator before spending a dollar on points.

Key details

• Cost: 1 point = 1% of the loan amount — $4,000 on $400,000, $3,000 on $300,000, $5,000 on $500,000. Paid in cash at closing and, in most programs, not financeable.
• Rate reduction: about 0.25% per point as a convention — $65.40 a month on a $400,000 loan. Actual pricing depends on credit score, occupancy, loan-to-value, and that day's rate sheet, so ask for real numbers at 0, 1, and 2 points.
• Break-even: point cost ÷ monthly savings. Here $4,000 ÷ $65.40 = 61 months. Anything past five years and one month, and the point has paid for itself.
• Payment effect: one point cuts a $400,000 payment from $2,528.27 to $2,462.87 — $784.80 a year. On a tight debt-to-income ratio, that $65.40 can matter as much as the dollar savings.
• Tax treatment: discount points on a purchase loan are generally deductible in the year paid; on a refinance they amortize over the loan term; origination points are a fee, not interest, and are not deductible as interest.
• Negotiability: points can be paid by the seller, the builder, or covered by a lender credit. A seller-paid point delivers the same $4,000 benefit with none of your cash, though a seller who agrees to it may hold firmer on price.
• Cash reserve: six months of payments on this loan is $15,170. Spending $4,000 of that on points trades liquidity for 0.25% of rate, and liquidity is what covers a job gap.

Mortgage points tips for 2026

1. Get real pricing before you model anything. The 0.25%-per-point rule is a starting point, not a quote. Ask each lender for the rate at 0, 1, and 2 points on the same day, same loan amount, same lock period, and run those exact pairs through this calculator. The difference between 6.50% with no points and 6.375% with one point on $400,000 is $32.79 a month against a $4,000 cost — break-even at 122 months, twice as long as the headline figure.
2. Buy points only with money you will not need. Keep six months of payments — $15,170 on this example — untouched. If $4,000 of points takes you below that line, the emergency fund is worth more than a quarter-point, because a reserve prevents a forced sale and a forced sale costs more than any rate reduction will ever save.
3. Match break-even to a hold period you can defend. If break-even is 61 months and you might relocate in three years, the answer is no. Price the downside before you commit: selling at month 40 leaves you 40 × $65.40 = $2,616 of savings against $4,000 spent, a $1,384 loss.
4. Compare the APR, not just the note rate. APR folds points and lender fees into the rate so two quotes can be judged on the same basis. A 6.25% rate carrying 2 points and $1,095 of lender fees has an APR near 6.47%. The distance between note rate and APR tells you how much of the headline discount is being charged back to you up front.
5. Run points against a lender credit. The opposite of buying down is accepting a slightly higher rate in exchange for cash toward closing costs. Frame both sides in dollars: not buying the point keeps $4,000 in your account and costs $65.40 a month, so at 36 months you are $1,646 ahead by refusing, and at 84 months you are $1,494 ahead by buying.
6. Re-price points if your loan size or program changes. FHA, VA, and jumbo loans price points differently from conventional loans, and a small down payment can trigger price-based adjustments that change what a point buys. Confirm the rate-per-point table for your actual program rather than carrying a conventional assumption into an FHA or VA application.

Common mistakes

• Assuming every point lowers the rate. An origination point is a processing fee. On a $400,000 loan, one origination point is $4,000 of pure cost with a break-even that never arrives, because the monthly savings are zero. Ask the lender to split discount points from origination charges in writing.
• Comparing quotes that carry different point levels. One lender at 6.25% with a $4,000 point against another at 6.375% with none looks like a clear win for the first — until you notice the second payment is only $32.61 higher and the first needs $4,000 back, a break-even of 123 months. Normalize every quote to the same points before choosing.
• Letting points drain the cash needed to close. Points compete with escrow prepaids, inspections, and moving costs. Buyers who stretch to buy points often arrive at the closing table short on reserves and end up putting the first mortgage payment on a credit card — an outcome that erases years of the 0.25% saving.
• Counting a future refinance as part of the payback. If you refinance at month 48, the point experiment ends there: you collected 48 × $65.40 = $3,139 of the $4,000 and are $861 behind. Points only work as a buy-and-hold instrument. For the refinance view, run the numbers in the refinance calculator instead.
• Treating the tax deduction as a refund of the cost. $4,000 of deductible points in the 22% bracket saves about $880 in tax, not $4,000, and only if you itemize. The standard deduction is high enough that many households never itemize at all, in which case the deduction is worth exactly nothing.
• Buying points while carrying more expensive debt. $4,000 applied to a 6.25% mortgage saves $65.40 a month. The same $4,000 against a 22% credit card saves about $73 a month in interest and clears the balance entirely. Retire the expensive debt first, then redirect the freed payment toward buying down the mortgage.

Frequently asked questions

How much does one mortgage point cost? One point equals 1% of your loan amount: $4,000 on a $400,000 loan, $3,000 on $300,000, and $5,000 on $500,000. Points are paid in cash at closing and generally cannot be rolled into the loan balance. Fractional points are common too — a half point on $400,000 is $2,000 and typically buys about 0.125% of rate.

How much does each point lower my interest rate? About 0.25% is the working convention: one point takes 6.50% to 6.25%, two points take it to 6.00%. Real pricing varies with credit score, loan-to-value, occupancy, and the day's rate sheet, so ask your lender for the specific rate at zero, one, and two points rather than assuming the standard trade applies to your file.

How long does it take for points to pay for themselves? Divide the point cost by the monthly savings. On $400,000, one point costs $4,000 and saves $65.40 a month, so 4,000 ÷ 65.40 = 61 months, just over five years. Two points cost $8,000, save $130.07 a month, and break even at 62 months. Your answer changes only if your lender's pricing per point differs from 0.25%.

Are mortgage points tax-deductible? Discount points on a purchase mortgage are generally deductible as mortgage interest in the year you pay them, provided you itemize. Points on a refinance are deducted evenly across the life of the new loan instead of up front. Origination points are a lending fee rather than interest and are not deductible as mortgage interest in either case.

Should I buy points or put more money down? With the same $4,000, one point on a $400,000 loan cuts the payment to $2,462.87 and lifetime interest to $486,633. Adding it to the down payment cuts the loan to $396,000, the payment to $2,502.99, and interest to $505,076. Points win on payment and interest; the down payment builds equity — and wins outright if it gets you to 20% and removes PMI.

Can the seller pay my points? Yes. Seller-paid discount points are a routine concession in purchase negotiations, usually capped at roughly 3% to 9% of the price depending on the loan program and your down payment. You get the lower rate with none of your own cash at risk, though a seller who agrees to fund points may be less willing to move on the asking price.

Do points affect my loan-to-value ratio? No. LTV is your loan amount divided by the appraised value, and points are a closing cost paid in cash — they change neither number. They do change your cash to close and your post-closing reserves, which is the real constraint for most buyers. Neither points nor LTV affect whether you need mortgage insurance; that threshold is 20% down.

Is it worth buying points if I might refinance? Usually not. Every point you buy is a bet on reaching break-even before you sell or refinance, and a refinance at month 48 recovers only 48 × $65.40 = $3,139 of a $4,000 point, leaving you $861 behind. Skip points if you expect rates to fall within five years and plan to act on it — that is a bet on the rate path, not on the loan.

Related calculators

• Mortgage Calculator — full payment with taxes, insurance, and PMI
• Compare Mortgages — side-by-side loan offer comparison
• Mortgage Rates — today's benchmark rates by term
• Refinance Calculator — test a rate drop against closing costs
• Down Payment Calculator — points versus cash down
• Closing Cost Calculator — everything due at the table