Mortgage Points Calculator
ℹ RefinanceUSA is not a lender. Results are estimates — assumes you keep the loan for the full term. How we calculate
What Are Mortgage Points?
A mortgage discount point is an upfront fee paid to the lender at closing in exchange for a permanently lower interest rate. One point equals 1% of the loan amount. The rate reduction per point depends on the lender and market conditions, but typically ranges from 0.125% to 0.25% per point on a 30-year loan.
Points differ from origination fees: origination fees are charges for processing the loan with no corresponding rate benefit. Discount points are optional prepaid interest that genuinely reduces your rate.
The Break-Even Formula
If you buy 1.5 points on a $350,000 loan at 1% per point, you pay $5,250 upfront. If the lower rate saves $56/month, break-even = 5,250 ÷ 56 = 93 months (7.75 years). Selling or refinancing before month 93 means the points cost you money.
Points Quick Reference: Rate Reduction vs. Cost
| Points Purchased | Cost on $350K | Typical Rate Drop | Monthly Savings* | Break-Even* |
|---|---|---|---|---|
| 0.5 pt | $1,750 | ~0.125% | ~$29/mo | ~60 months |
| 1.0 pt | $3,500 | ~0.25% | ~$57/mo | ~61 months |
| 1.5 pts | $5,250 | ~0.375% | ~$86/mo | ~61 months |
| 2.0 pts | $7,000 | ~0.50% | ~$114/mo | ~61 months |
| 3.0 pts | $10,500 | ~0.75% | ~$171/mo | ~61 months |
*Based on $350K loan at 7.0% base rate, 30-year term. When rate reduction per point is constant, break-even stays roughly constant regardless of number of points — the key driver is cost-efficiency per basis point of rate reduction.
3 Scenarios: When Points Win and When They Don't
Scenario 1 — Long-term holder: Points are a smart investment
$450K loan, staying 10+ years, buying 2 points
| Loan amount | $450,000 |
| Rate without points | 7.00% |
| Points purchased | 2.0 pts ($9,000) |
| Rate with points | 6.50% |
| Monthly savings | $149/mo |
| Break-even | 60 months (5 years) |
| 10-year net savings | +$8,880 |
| Lifetime net savings (30yr) | +$44,640 |
For a borrower who plans to stay 10+ years, paying $9,000 in points returns nearly $44,000 in lifetime interest savings — a 4.9x return. The 5-year break-even is comfortable for long-term holders.
Scenario 2 — Short-term holder: Points destroy value
$400K loan, selling in 4 years, buying 1.5 points
| Loan amount | $400,000 |
| Rate without points | 7.00% |
| Points purchased | 1.5 pts ($6,000) |
| Rate with points | 6.625% |
| Monthly savings | $98/mo |
| Break-even | 61 months |
| 4-year net savings (actual hold) | −$1,296 |
Selling before break-even turns points into a net loss. Here, paying $6,000 in points to save $98/month is a losing trade for a 4-year hold — the homeowner would have saved $1,296 by choosing the no-point loan. When in doubt about how long you'll stay, skip the points.
Scenario 3 — Refinance risk: Points may be wasted if rates drop
$380K loan today, rates expected to drop in 2 years
| Points paid today | 2.0 pts ($7,600) |
| Rate today with points | 6.50% |
| Projected rate in 2 years | 5.75% (if rates fall) |
| Break-even at current savings | 61 months |
| If refinanced at month 24 | $7,600 points cost, only $48/mo × 24 = $1,152 recovered — −$6,448 loss on points |
Points are permanently tied to this specific loan. If rates drop and you refinance into a better loan, you lose the unrecovered portion of your points investment. In an environment where rates are expected to decrease, buying points amplifies the downside risk of refinancing early.
Frequently Asked Questions
What is a mortgage point?
One discount point equals 1% of the loan amount paid upfront at closing to permanently lower your interest rate. On a $350,000 loan, one point costs $3,500. The rate reduction per point typically ranges from 0.125% to 0.25% on a 30-year fixed loan.
Should I buy mortgage points?
Only if you'll keep the loan past the break-even point. Divide the cost of points by your monthly savings to find break-even in months. If you're likely to sell, move, or refinance before that date, skip the points. Points deliver the most value for long-term holds in a stable or rising rate environment.
How much does 1 point lower my rate?
Typically 0.125% to 0.25% per point on a 30-year fixed loan. The exact reduction varies by lender and market. Compare lenders' rate sheets to find the most efficient points pricing — some lenders offer better rate reductions per dollar of points than others.
Are mortgage points tax deductible?
Yes, in most cases. Points on a purchase mortgage are typically fully deductible in the year paid. Points on a refinance must be deducted over the life of the loan (amortized). Consult a tax professional for your specific situation.
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Compare Full Loan Offers Including Points
The RefinanceUSA calculator lets you compare two lender offers side by side — including all fees, points, and rate differences — so you can see which deal is genuinely cheaper over your expected hold period.
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