Mortgage Points Calculator

Should you pay upfront to buy down your mortgage rate? Each point costs 1% of your loan amount and typically reduces your rate by 0.25%. This calculator shows your exact break-even month and how much you save — or lose — depending on how long you stay.

How mortgage points work

Discount points are upfront fees paid to your lender in exchange for a lower interest rate. One point costs 1% of your loan amount. On a $400,000 loan, one point costs $4,000. The rate reduction per point varies by lender and market conditions — typically 0.125% to 0.375% per point, with 0.25% being most common.

When buying points makes sense

Points make financial sense when your break-even period is shorter than how long you plan to keep the loan. If you plan to stay in the home for 10+ years and the break-even is 4 years, buying points is excellent value — you’re essentially earning a guaranteed 6%+ return on the upfront cost. Points don’t make sense if you might refinance, sell, or move before the break-even date.

The tax deduction benefit

Mortgage discount points are generally tax deductible in the year you pay them when buying a primary residence (subject to itemizing deductions). This effectively reduces your out-of-pocket cost. On $8,000 in points at a 24% tax bracket, the after-tax cost is $6,080 — which shortens your break-even period. Consult a tax advisor for your specific situation.