Mortgage points break-even calculator
Find when paying points for a lower rate pays off, and what they save over the years you keep the loan.
Your numbers
Rates shown are editable examples, not current offers.
Points save you
$2,442Over 7 years, after the $3,200 cost of the points.
- Cost of points
- $3,200
- Payment without points
- $2,129
- Payment with points
- $2,076
- Monthly savings
- $53
- Simple break-even
- 60 months
- Break-even counting interest
- 48 months
Understand this estimate
Compares two fixed-rate loans of the same amount and term. The cost of points is the number of points times 1% of the loan. The simple break-even divides that cost by the monthly payment savings. The interest-based break-even is the first month when the interest saved, which includes the faster principal paydown at the lower rate, exceeds the cost. Excludes taxes, other fees, and what the cash could earn elsewhere.
How the calculation works
The calculator compares two fixed-rate loans of the same amount and term: one at the rate without points and one at the lower rate you would get by paying points. Each point costs 1% of the loan amount.
It shows two break-evens. The simple one divides the cost of the points by the monthly payment savings. The interest-based one finds the first month when the interest you save exceeds the cost, which comes sooner because the lower rate also pays down principal a little faster. Finally, it totals the net savings or cost over the years you expect to keep the loan.
Worked example: one point on $320,000
A $320,000, 30-year loan at 7.00% has a monthly payment of about $2,129. Paying one point, $3,200, for a 6.75% rate lowers it to about $2,076, saving about $53 a month. The simple break-even is 60 months, but counting interest the point pays for itself at month 48. If you keep the loan seven years, the point saves about $2,442 overall; if you sell after three years, it costs you about $789.
Common questions
What is a mortgage point?
A discount point is an upfront charge, usually 1% of the loan amount, that lowers your interest rate. How much the rate drops for each point varies by lender and day, so compare written quotes.
Why are there two break-evens?
The simple break-even counts only the lower payment. The interest-based break-even also counts the slightly faster principal paydown at the lower rate, which is why it arrives sooner.
What if I refinance or sell early?
Any month before the break-even means the points cost more than they saved. If you might move or refinance within a few years, test that horizon in the calculator.
Does this include taxes?
No. Points can sometimes be deducted if you itemize, but that depends on your situation and IRS rules, so the calculator leaves taxes out.
Related guides
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