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Mortgage Points vs Rate Calculator

Mortgage Points vs Rate Calculator

One point costs 1% of your loan up front and usually cuts your rate by about a quarter of a percent. This calculator shows whether that trade pays off for you, and exactly when.

A mortgage discount point costs 1% of the loan amount up front and typically lowers the interest rate by about 0.25%, though the exact reduction varies by lender. The break-even point is the upfront cost divided by the monthly payment savings: for example, $4,000 in points that saves $66 per month breaks even after about 60 months. If you sell or refinance before break-even, the points lose money; if you stay longer, they save money. Points on a purchase loan for your main home are often tax-deductible in the year paid (IRS Topic 504); points on a refinance are generally deducted over the life of the loan.

Compare points vs no points

Data current as of October 2026. Rate math follows standard amortization; tax notes follow IRS Topic 504. Verify current point pricing with your lender.

Monthly payment, no points$0.00
Monthly payment with points$0.00
Monthly savings$0.00
Upfront cost of points$0.00
Break-even--
Total interest saved over full term$0.00

How the math worked

    Fig. 1. Monthly payment, break-even timing, and lifetime interest compared with and without discount points.

    This is an estimate for planning only, not financial or tax advice. Actual point pricing, rate reductions, and loan terms vary by lender, loan program, and market conditions. Confirm figures with your lender and consult a tax professional about deductibility before making decisions.

    How mortgage points actually work

    Mortgage discount points are prepaid interest. Each point costs 1% of the loan amount and is paid at closing, and in exchange the lender lowers the interest rate, typically by about 0.25 percentage points per point. On a $400,000 loan, one point costs $4,000 and might move a 6.75% rate to 6.50%. The Consumer Financial Protection Bureau (consumerfinance.gov) notes that the exact rate reduction per point varies by lender and by market, so the 0.25% figure is a rule of thumb, not a guarantee.

    The only question that matters is break-even: the upfront cost divided by the monthly savings. In the example above, the payment falls from about $2,594 to about $2,528, a $66 monthly savings, and $4,000 divided by $66 is roughly 60 months. Everything after month 60 is pure savings; selling or refinancing before month 60 turns the points into a loss. That is why points favor buyers who plan to stay put, and why they are a poor deal for anyone who expects to move or refinance within a few years.

    Points are not the same as origination points, which are lender fees for processing the loan and buy nothing down. And points compete with a larger down payment: extra cash at closing can either buy a lower rate or shrink the loan balance, and the down payment route also helps with loan-to-value, private mortgage insurance, and equity. Run both options before deciding.

    Learn more about mortgage points

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