Mortgage Points Calculator
Points trade cash at closing for a lower rate forever. Enter what the points cost and the rate they buy, and see the monthly saving and the month you break even.
Points are prepaid interest wearing a disguise
One point costs 1% of the loan at closing and typically buys the rate down about a quarter of a percent. Whether it is a bargain is a single division: the cost divided by the monthly saving gives the month the deal turns profitable. Everything after that month is genuine saving; everything before it is a loss if you move or refinance.
Break-even months = (points × loan ÷ 100) ÷ (old payment − new payment)
Example: one point on a $300,000 loan costs $3,000 and cuts the rate from 7% to 6.75%, saving about $49 a month. Break-even: roughly month 61. Stay seven years or more and the point paid; leave in four and it did not.
Who points reward
Points reward exactly one person: the borrower who keeps this loan, un-refinanced, for a long time. Serial refinancers and short-stay buyers systematically donate points to lenders — which is why lenders love offering them.
How this is calculated
Cost = loan × points ÷ 100. Old and new payments are standard amortizations at the two rates over the same term; monthly saving is their difference; break-even = cost ÷ saving. Lifetime figures amortize both loans fully and subtract the point cost from the interest difference. If your lender quotes a different reduction per point, enter that — the 0.25 default is a market habit, not a rule.
Frequently asked questions
How much does one point usually lower the rate?
About 0.25% is the common quote, but it varies daily and by lender — sometimes 0.15%, sometimes 0.35%. Always price the actual pair you are offered, which is what the form does.
Can I buy fractional points?
Often yes — half points and quarter points are common, and some lenders let you take negative points (a lender credit) in exchange for a higher rate. The same break-even logic runs in reverse.
Are points tax-deductible?
Points on a purchase mortgage are often deductible in the year paid if conditions are met; refinance points are usually spread over the loan's life. This is general information, not tax advice — your situation governs.
Points or a bigger down payment?
They solve different problems: down payment shrinks the loan and can remove PMI; points shrink the rate. If you are near the 20% threshold, the down payment usually wins; far from it, compare break-evens.
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