Mortgage Points Calculator
Should you buy points to lower your rate? This decision can save or cost you $10,000+. Get instant ROI analysis.
Compare Rates with & without Points
Before deciding on points, compare offers from multiple lenders. Some lenders offer better base rates than others with points.
Mortgage Points Calculator
Should you buy points to lower your interest rate?
Cost: $8,000 (2% of loan amount)
Critical factor for break-even analysis
📊 Rate Comparison
Without Points
7%
With 2 Points
6.5%
↓ 0.5% lower
💡 How Points Work
Each point costs 1% of your loan amount and typically reduces your rate by 0.25%. The more points you buy, the lower your rate and monthly payment.
RECOMMENDATION
BUY POINTS - You'll save $7,952.546 over 10 years
ROI: 99% over 10 years
💰 Without Points
Interest Rate
7%
Monthly Payment
$2,661.21
Upfront Cost
$0
✅ With 2 Points
Interest Rate
6.5%
Monthly Payment
$2,528.272
Upfront Cost
$8,000
⏰ Break-Even Analysis
Monthly Savings
$132.938
Break-Even Point
5.0 years
(60 months)
Savings After 10 Years
$7,952.546
📊 Savings Breakdown
✅ Buy Points If:
- •You'll stay in the home beyond break-even (5.0 years)
- •You have extra cash for closing costs
- •You want to lower your monthly payment
- •You're close to DTI limits (lower payment helps qualify)
- •Rates are high and unlikely to drop soon
⚠️ Don't Buy Points If:
- •You'll move or refinance before break-even
- •You need cash for down payment or reserves
- •You plan to make extra payments (pay off early)
- •You expect rates to drop (refinance opportunity)
- •You could invest the money elsewhere for higher returns
🎯 Ready to Lock Your Rate?
Get quotes with and without points from top lenders. Compare your options and make the best decision for your situation.
Understanding Mortgage Points
What Are Mortgage Points?
Mortgage points (also called discount points) are fees you pay upfront to lower your interest rate. Each point costs 1% of your loan amount and typically reduces your rate by 0.25%. It's essentially prepaying interest to get a lower rate.
Example: On a $400,000 loan, 1 point costs $4,000 and might reduce your rate from 7.0% to 6.75%. This saves you $67/month ($24,120 over 30 years) but costs $4,000 upfront. Break-even is 60 months (5 years).
Types of Mortgage Points
💎 Discount Points
Purpose: Lower your interest rate
- •1 point = 1% of loan amount
- •Typically reduces rate by 0.25% per point
- •Tax-deductible (if itemizing)
- •Permanent rate reduction
📋 Origination Points
Purpose: Lender fees for processing
- •Also called origination fees
- •Does NOT lower your rate
- •May be tax-deductible
- •Negotiable with lender
The Break-Even Formula
Break-Even (months) = Cost of Points ÷ Monthly Savings
If you stay beyond this point, buying points saves money
Example 1: Good Deal
Cost: $4,000
Savings: $100/mo
Break-even: 40 months (3.3 years)
✓ Buy if staying 5+ years
Example 2: Borderline
Cost: $8,000
Savings: $100/mo
Break-even: 80 months (6.7 years)
⚠️ Risky if uncertain
Example 3: Bad Deal
Cost: $12,000
Savings: $100/mo
Break-even: 120 months (10 years)
✗ Don't buy points
Frequently Asked Questions
Are mortgage points tax-deductible?
Yes, if you itemize deductions. Discount points are fully deductible in the year paid for a primary residence purchase. For refinances, points must be deducted over the life of the loan. With the higher standard deduction ($13,850 single, $27,700 married in 2023), many homeowners don't benefit from itemizing.
Can I negotiate mortgage points?
Yes! The rate reduction per point is negotiable. Some lenders offer 0.25% per point, others 0.375%. Shop around and compare offers. Also, origination points (lender fees) are highly negotiable - many lenders will waive them to win your business.
What if I refinance before break-even?
You lose money. If you paid $8,000 for points and refinance after 3 years (saving only $3,600), you're down $4,400. This is why it's critical to estimate how long you'll keep the loan. If rates might drop, don't buy points - wait to refinance.
Should I buy points or make a larger down payment?
Generally, prioritize down payment to avoid PMI (if below 20%). Once you hit 20%, compare: buying points gives guaranteed savings, while a larger down payment reduces your loan balance and builds equity faster. If you're close to a DTI limit, points (lower payment) help you qualify.
Can the seller pay for my points?
Yes! Seller concessions can cover discount points. This is common in buyer's markets. The seller pays your points at closing, lowering your rate without using your cash. Maximum concessions: 3% (FHA), 6% (conventional), 4% (VA). This is a great negotiation tactic.