This mortgage points calculator answers the closing-table question: does paying points to buy down your rate actually pay off before you sell or refinance? Cost, monthly savings, and the breakeven month.
The decision rule: points pay only if you’ll hold this loan (no sale, no refinance) past the breakeven month. Average mortgage lifespans are far shorter than 30 years — moves and refis kill most loans inside a decade — which is why breakevens beyond ~5 years fail more often than marketing suggests. (Fine print ignored here, flagged honestly: points may be tax-deductible on purchases, and the no-points loan’s unused cash could earn returns — both shift marginal cases.)
Breakeven = Points Cost ÷ Monthly Savings
One point = 1% of the loan, paid at closing, typically buying ~0.25% off the rate (the exchange rate varies daily and by lender — negotiate it). Everything after breakeven is profit; everything before is a donation if the loan ends early. Full payment math on our Mortgage Calculator. Part of our Finance Calculators collection.
Worked Example (Verified)
- $400k, 30 yr, 7.00% → 6.75% for 1 point (defaults): payments $2,661.21 vs $2,594.39 — saving $66.82/mo; point costs $4,000 → breakeven month 60 (5.0 years)
- Held the full 30 years: 360 × 66.82 − 4,000 = $20,055 net saved — points reward the rare stay-put borrower handsomely
- Sold at year 4: 48 × 66.82 = $3,207 recovered of $4,000 — a $793 loss, the statistic behind “average” advice against points
- Rate-drop sensitivity: if 1 point buys only 0.125% on a given day, savings halve and breakeven doubles to ~10 years — always compute with the day’s actual quote pair, never the folklore 0.25
Points Strategy, Briefly
- Compare lenders on the (rate, points) frontier, not rate alone — lender credits (negative points) are the same trade reversed for the cash-poor.
- Refinance candidates shouldn’t buy points: a refi resets the clock and strands the unrecouped cost.
- Sellers’ concessions spent on points can be efficient when the seller pays — breakeven against someone else’s money is instant.
- ARM buyers: points buy down a rate that resets anyway — the holding-period logic collapses further.
Related Tools
- Refinance Calculator — the same breakeven logic, bigger stakes
- APR Calculator — points folded into true cost
- Finance Calculators — the full collection
Frequently Asked Questions
What are mortgage points?
Prepaid interest: one point costs 1% of the loan amount at closing in exchange for a lower rate (commonly ~0.25% per point, though the trade varies). “Origination points” are different — lender fees with no rate benefit — so confirm your quote’s points are discount points before using this calculator.
How do I calculate the breakeven on points?
Breakeven months = points cost ÷ monthly payment savings. $4,000 of points saving $66.82/month breaks even at month 60. Keep the loan past that and points profit; exit earlier and they lose — the only question that matters is your realistic holding period.
Are points worth it?
If you’ll hold the loan well past breakeven and won’t refinance into lower rates first, yes — the defaults net ~$20k over a full 30-year hold. Given typical holding periods of 6–10 years and breakevens near 5, it’s genuinely marginal for many buyers; run your quote’s real numbers.
Should I buy points if I might refinance?
Generally no: refinancing starts a new loan and the old points’ remaining value evaporates. The more likely a future refi (rates falling, credit improving, short tenure), the steeper the discount points demand. Keep the cash liquid instead.
Are mortgage points tax-deductible?
Points on a loan to buy your primary home are generally deductible in the year paid (US rules, conditions apply); points on refinances are typically amortized over the loan’s life. It softens the cost by your marginal tax rate — worth including in close calls, with a tax professional’s confirmation.
Is this mortgage points calculator free?
Yes — free, instant, no sign-up.