Mortgage Points Calculator 2026 — Should You Buy Down Your Rate? See Your Exact Break-Even
Your lender offers: pay $6,000 today (1 point) → save $82/month forever. Worth it? Only if you stay 73+ months. This calculator does the exact math — including tax benefit — in seconds.
🎯 Mortgage Points Break-Even Calculator 2026
See your exact break-even date and whether buying points makes sense
Verdict
✅ BUY POINTS
Break-even in 45 months — great if you stay 5+ years
Points Break-Even Quick Reference — $500K Loan @ 7.25% (0.25% per point)
| Points Paid | Upfront Cost | New Rate | Monthly Savings | Break-Even | 10-yr Net Gain |
|---|---|---|---|---|---|
| 0.5 point(s) | $2,500 | 7.125% | $41/mo | 61 months | +$2,420 |
| 1.0 point(s) | $5,000 | 7.00% | $82/mo | 61 months | +$4,840 |
| 1.5 point(s) | $7,500 | 6.875% | $123/mo | 61 months | +$7,260 |
| 2.0 point(s) | $10,000 | 6.75% | $164/mo | 61 months | +$9,680 |
| 3.0 point(s) | $15,000 | 6.50% | $246/mo | 61 months | +$14,520 |
*Break-even consistent because cost and savings scale proportionally. Net gain assumes 120 months (10 years) of ownership.
Buy Points vs. Don't Buy Points — The Decision Framework
✅ BUY POINTS WHEN:
- ✅ You plan to stay 7+ years (safely past break-even)
- ✅ You have cash to spare at closing
- ✅ You're in a high tax bracket (points are deductible)
- ✅ You're buying a forever home or long-term investment property
- ✅ Rates are high and you expect to stay (no refi plans)
- ✅ Seller is offering concessions — use them for points
❌ SKIP POINTS WHEN:
- ❌ You might move or sell within 5 years
- ❌ You plan to refinance when rates drop
- ❌ You need cash reserves after closing
- ❌ You have high-interest debt (8%+ CC debt)
- ❌ Your break-even is 7+ years
- ❌ The lender offers poor rate reduction per point
Mortgage Points FAQ
How much does one mortgage point cost and how much does it lower my rate?
One mortgage point costs exactly 1% of your loan amount. One point typically reduces your interest rate by 0.20–0.25% (this varies by lender and market conditions). Examples: $400,000 loan: 1 point = $4,000. Rate reduction: 7.25% → 7.00% (0.25% lower). $600,000 loan: 1 point = $6,000. Rate reduction: 7.25% → 7.00%. $800,000 loan: 1 point = $8,000. Rate reduction: 7.25% → 7.00%. Some lenders offer fractional points (0.5 points, 1.5 points, 2 points). The rate reduction per point varies: competitive lenders may offer 0.25% per point, while others offer only 0.125% per point. Always ask for the exact rate reduction per point when comparing lenders — the value of buying points differs significantly by lender.
When does it make financial sense to buy mortgage points?
Buying mortgage points makes financial sense when: You plan to stay in the home long enough to pass the break-even point. Break-even = cost of points ÷ monthly savings. Example: $4,000 in points → $55/month savings → break-even = 72 months (6 years). If you stay 10+ years: buying points is a great deal. If you stay 3 years: points are a waste. You have cash available at closing (points are paid upfront, not financed). You can't get a lower rate elsewhere (always compare). Interest rates are expected to stay elevated (if you plan to refinance in 2 years, don't buy points). Cases where buying points is NOT worth it: You expect to refinance within 3–5 years. You have high-interest debt to pay off (better ROI). You need the cash for reserves. The seller is offering concessions — use them for points instead of closing costs if you're staying long-term.
Are mortgage points tax deductible?
Yes — mortgage points are tax deductible under specific IRS rules. For a home purchase: Points paid are generally fully deductible in the year paid if they represent prepaid interest. Requirements: Must be for your primary residence. Must be computed as a percentage of the loan amount. Must be paid directly at closing (not financed into the loan). The HUD-1 or Closing Disclosure must show the points separately. For a refinance: Points on a refinance are NOT fully deductible in year 1. They must be deducted over the life of the loan (amortized). If you refinance again before paying them all off, the remaining deduction is taken in the refinance year. Tax benefit calculation: On $6,000 in points, at 32% tax bracket: effective cost = $6,000 × (1 − 0.32) = $4,080. This improves your break-even calculation. Always consult a tax professional for your specific situation.
What is the difference between discount points and origination points?
Discount points: Prepaid interest that buys down your rate. 1 point = 1% of loan, reduces rate by 0.20–0.25%. Fully tax deductible on primary residence purchase. You choose to pay these — they're optional. Origination points (or origination fee): A lender fee for processing your loan. 1 origination point = 1% of loan. Does NOT reduce your interest rate. Tax deductible in some circumstances (consult CPA). You may be able to negotiate this fee. How to distinguish them on your Loan Estimate: Section A of the Loan Estimate (page 2) shows origination charges separately from discount points. Discount points appear as "Discount points" with a specific rate being purchased. Always ask your lender which fees are negotiable and exactly how many basis points each discount point reduces your rate.
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Meet David
Refinance & Rate Specialist
David Rodriguez is a seasoned refinancing expert with over 10 years of experience in mortgage rate analysis and market trend forecasting. As a Certified Rate Lock Specialist, he has saved homeowners millions in interest payments through strategic refinancing timing. His expertise in Federal Reserve policy impact and mortgage-backed securities makes him a go-to expert for rate predictions and refinancing strategies.
EXPERTISE:
KEY ACHIEVEMENT:
Saved clients $50M+ in interest payments