Mortgage Discount Points Calculator

Should You Buy Mortgage Points?

Mortgage discount points let you pay an upfront fee to permanently lower your interest rate. One point costs 1% of your loan amount and typically reduces your rate by about 0.25 percentage points. Our free points calculator shows the upfront cost, your new monthly payment, the monthly savings, your break-even point, and your total net savings over the life of the loan.

How to Use the Points Calculator

1. Loan amount: Enter the amount you are borrowing.
2. Base rate: The interest rate your lender quoted without points.
3. Points: How many points you are considering (1, 2, 1.5, etc.).
4. Rate reduction: The rate drop per point your lender offers (typically 0.25%).
5. Term: The length of your mortgage, 10 to 30 years.

How to Decide if Points Are Worth It

The key question is how long you will keep the mortgage. If you stay past the break-even point, buying points saves you money. If you sell or refinance before break-even, you lose. As a rough rule:

• Keeping the loan 5+ years: Points often pay off.
• Moving or refinancing within 5 years: Usually skip the points.
• Low cash at closing: Skip points; you can always refinance later if rates drop.

Worked Example: 1 Point on a $400,000 Loan

Suppose you are taking out a $400,000 30-year fixed mortgage. Your lender offers a 6.5% rate with no points, or 6.25% if you pay 1 point ($4,000). Here is the math:

Buying 1 point saves you about $65/month. To recoup the $4,000 upfront cost you need to keep the loan about 61 months (just over 5 years). If you stay in the home for the full 30 years, the points save you roughly $19,500 in interest after accounting for the upfront cost.

Points vs. Mortgage Buydown

Discount points permanently lower your rate for the entire loan term. A mortgage buydown only lowers your rate temporarily for the first few years, then the rate adjusts up to the note rate. Use our buydown calculator to compare the temporary buydown option, or use this calculator to evaluate paying points for a permanent rate reduction.

Discount Points Glossary

Discount point

An upfront fee equal to 1% of the loan amount, paid to permanently lower the interest rate. On a $400,000 loan, 1 point costs $4,000.

Break-even point

The number of months it takes for your monthly savings from a lower rate to equal the upfront cost of the points. If you sell or refinance before break-even, you lose money on the points.

Origination point

A fee charged by the lender for processing the loan, also equal to 1% of the loan amount. Origination points do not lower your rate — they are a separate charge from discount points.

Rate reduction per point

How much one point lowers your interest rate. The industry average is about 0.25 percentage points, but the exact reduction varies by lender and market conditions.

Permanent vs. temporary buydown

Discount points are a permanent buydown — the lower rate lasts for the life of the loan. A temporary buydown (2-1, 3-2-1) only lowers the rate for the first few years, then it returns to the note rate.