Should I buy mortgage points? Find out instantly. Calculate whether buying discount points on your mortgage saves you money based on your loan amount, interest rate, and how long you plan to stay in the home.
| Scenario | Rate | Monthly Payment | Points Cost |
|---|---|---|---|
| No Points | 6.50% | $1,897 | $0 |
| 1 Point | 6.25% | $1,847 | $3,000 |
| 2 Points | 6.00% | $1,799 | $6,000 |
With 1 point, you save $50/month. Break-even is 60 months (5 years). If you stay longer than 5 years, buying the point saves money.
On a $400,000 loan at 7% with 1 point (cost $4,000, rate drops to 6.75%):
Key insight: The longer you stay, the more valuable points become.
The impact of points scales with loan size:
The break-even period is similar, but the absolute savings are much larger on bigger loans, making points more impactful for higher loan amounts.
M = Monthly payment
P = Principal loan amount
r = Monthly interest rate (annual rate ÷ 12)
n = Total number of monthly payments (years × 12)
1 point = 1% of the loan amount
Example: $300,000 loan × 1% = $3,000 cost
Monthly Savings = Payment(no points) − Payment(with points)
If break-even < planned stay: Points are worth it
If break-even > planned stay: Points are not worth it
Includes both the upfront cost and ongoing savings
Positive value means points save you money overall
Mortgage points (also called discount points) are a form of prepaid interest that allows you to reduce your mortgage interest rate. One point typically costs 1% of your loan amount and reduces your interest rate by approximately 0.25% (though this varies by lender and market conditions).
When you buy points, you pay an upfront fee at closing in exchange for a lower monthly payment over the life of the loan. This is essentially "buying down" your interest rate. The key question is whether the long-term savings outweigh the upfront cost — and that depends primarily on how long you plan to keep the mortgage.
You plan to stay in the home for many years (5+), you have extra cash for closing, and you want lower monthly payments. Points are essentially a guaranteed return on investment — the savings are predictable and tax-deductible.
You plan to sell or refinance within a few years, you're tight on closing costs, or interest rates are already very low. In these cases, the upfront cost is unlikely to be recouped through monthly savings.
The relationship between points and rate reduction isn't always linear. While a common rule of thumb is that 1 point = 0.25% rate reduction, the actual reduction depends on your lender, loan program, and current market conditions. Some lenders may offer different pricing structures.
| Points Purchased | Approximate Rate Reduction | Example Rate (from 6.50%) | Cost on $300k Loan |
|---|---|---|---|
| 0 | 0.00% | 6.50% | $0 |
| 0.5 | ~0.125% | 6.375% | $1,500 |
| 1.0 | ~0.25% | 6.25% | $3,000 |
| 1.5 | ~0.375% | 6.125% | $4,500 |
| 2.0 | ~0.50% | 6.00% | $6,000 |
Actual rate reductions vary by lender. Always get a personalized quote from your mortgage lender.
Educational Purposes Only: This mortgage points calculator is provided for educational and informational purposes only. Results are estimates based on the information you provide and assume a standard 0.25% rate reduction per point. Actual rate reductions vary by lender, loan program, and market conditions. This calculator does not constitute financial advice, loan approval, or a commitment to lend. Always consult with a qualified mortgage professional and review official loan documents before making financial decisions. Mortgage points may have tax implications — consult a tax advisor for your specific situation.