Mortgage Points Calculator
Calculate break-even point and savings when buying mortgage discount points
Mortgage Points Analysis
Option 1: Buy Points
Typically 0.5 to 3 points
Usually 0.25% per point
Option 2: Comparison
Results Comparison
| Metric | No Points | Option 1 (1 points) | Option 2 (3 points) | Difference |
|---|---|---|---|---|
| Principal | $250,000 | $250,000 | $250,000 | $0 |
| Interest Rate | 3.250% | 3.000% | 2.500% | -0.500% |
| Monthly Payment | $1088.02 | $1054.01 | $987.80 | $-66.21 |
| Monthly Savings | $0 | $34.01 | $100.21 | $66.21 |
| Points Cost | $0 | $2,500 | $7,500 | $5,000 |
| Break-even Point | N/A | 74 months | 75 months | 2 months |
| Total Interest | $141,685.687 | $129,443.63 | $105,608.809 | $-23,834.821 |
| Net Savings (After Points Cost) | $0 | $9,742.057 | $28,576.878 | $18,834.821 |
Break-even Analysis
Time to break-even: 74 months (6.1 years)
Break-even date: November 4, 2031
Monthly savings: $34.01
Total net savings: $9,742.057
Smart Recommendations
Breaking even in 74 months (6.1 years) is a long time. Consider if you'll stay in the home that long.
Mortgage Points Overview
What are Points?
Upfront fees to lower your interest rate
1 point = 1% of loan amount
Rate Reduction
Typically 0.25% per point
Varies by lender and market
Tax Benefits
Points may be tax deductible
Consult a tax professional
When to Buy Points
Planning to stay in home long-term
Have extra cash available
Want to reduce monthly payments
Planning to move soon
Need cash for emergencies
Have high-interest debt
Understanding Mortgage Points
How Mortgage Points Work
Mortgage points, also called discount points, are fees you pay directly to the lender at closing in exchange for a reduced interest rate. This is also called "buying down the rate."
Point Costs
- •1 point = 1% of the loan amount
- •0.5 points = 0.5% of the loan amount
- •Example: 1 point on $300,000 loan = $3,000
Break-even Calculation
Break-even = Points Cost ÷ Monthly Savings
The break-even point tells you how many months it will take to recoup the upfront cost of buying points through monthly payment savings.
Example: If you pay $3,000 for points and save $50/month, you'll break even in 60 months (5 years).
Tax Considerations
Mortgage points are generally tax-deductible as prepaid mortgage interest. However, there are specific rules:
- •Points on a home purchase may be fully deductible in the year paid
- •Points on a refinance must typically be deducted over the life of the loan
- •You must itemize deductions to claim mortgage points