$400k loan, 30 years, 7.0% → 6.5% with 1.5 points
- Points cost = $6,000
- Savings ≈ $133/mo
- Breakeven ≈ 45 months (~3.8 years)
finance calculator
Mortgage Points Breakeven Calculator
Estimate monthly savings from discount points and how long it takes to break even.
Results
- Payment without points
- $2,661 USD
- Payment with points
- $2,528 USD
- Monthly savings
- $133 USD
- Points cost
- $6,000 USD
- Breakeven (months)
- 45.13
- Breakeven (years)
- 3.76
How to use this calculator
- Enter the loan amount, term, and rate without points.
- Enter the discounted rate with points and the points cost (% of loan).
- See the payment with/without points, monthly savings, and breakeven time.
Inputs explained
- Rate without points
- APR you’d pay if you don’t buy points.
- Rate with points
- APR after buying discount points.
- Points cost (% of loan)
- Percent of the loan paid upfront to lower the rate (e.g., 1.5%).
- Term (years)
- Loan term used for both payments.
How it works
Monthly payments are computed for both rates using the same loan amount and term.
Points cost = loan amount × points %. Breakeven months = points cost ÷ monthly savings.
If the discounted rate doesn’t save money, breakeven shows as 0.
Formula
Payment = (P × r) / (1 − (1 + r)^(-n)) Points cost = Loan × Points% Breakeven months = Points cost ÷ (Payment without − Payment with)
When to use it
- Comparing points vs. no points for a purchase or refinance.
- Estimating breakeven time if you expect to sell or refi later.
- Budgeting closing costs and deciding how much to buy down the rate.
Tips & cautions
- If you won’t keep the loan past breakeven, points may not pay off.
- Compare points cost to alternative uses of cash (emergency fund, debt payoff).
- Check if the lender offers lender credits; the math is similar in reverse.
- Ignores taxes, PMI, and other closing costs; focuses on payment difference and points cost.
- Assumes fixed rates and a full term; selling or refinancing earlier shortens the benefit window.
Worked examples
$500k loan, 30 years, 6.5% → 6.0% with 2 points
- Points cost = $10,000
- Savings ≈ $163/mo
- Breakeven ≈ 62 months (~5.2 years)
Deep dive
Discount points trade upfront cash for a lower mortgage rate. This calculator shows payment with and without points, monthly savings, and how many months it takes to recover the points cost.
Use it to decide if buying points makes sense given your timeline to sell or refinance. If you won’t hold the loan past breakeven, keeping the cash might be smarter.
FAQs
- What is a mortgage point?
- A point is typically 1% of the loan amount, paid upfront to lower your interest rate.
- When do points make sense?
- Usually when you’ll keep the loan beyond the breakeven period and want a lower monthly payment.
- Are points tax-deductible?
- Sometimes. Deductibility depends on the type of loan and use—consult a tax professional.
- Should I buy points on an ARM?
- Points on ARMs may have less benefit if the rate adjusts soon. Compare costs carefully against your expected horizon.
- Is it better to use cash for points or for a higher down payment?
- It depends. A higher down payment reduces principal and may remove PMI; points lower the rate. Compare breakeven and overall savings.
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Approximate only. Closing costs, taxes, and future refi/sale plans affect value. Not financial advice.