📍 Mortgage Points Calculator
Calculate mortgage points cost and break-even analysis
Each point costs 1% of the loan amount and typically lowers rate by 0.25%
How to Use This Calculator
Enter Loan Details
Input your loan amount and loan term in years.
Enter Points and Rates
Input the number of points you're considering, the interest rate without points, and the interest rate with points.
Review Points Analysis
See the cost of points, monthly savings, break-even point, and total savings to determine if paying points is worth it.
Formula
Points Cost = Loan Amount × (Points / 100)
Monthly Payment = P × [r(1+r)^n] / [(1+r)^n - 1]
Monthly Savings = Payment (No Points) - Payment (With Points)
Break-Even = Points Cost / Monthly Savings
Example: 1 Point on $300,000 Loan
Loan Amount: $300,000
Points: 1 (costs $3,000)
Rate Without Points: 4.5%
Rate With Points: 4.25%
Monthly Payment (No Points): $1,520.06
Monthly Payment (With Points): $1,475.82
Monthly Savings: $44.24
Break-Even: $3,000 / $44.24 = 68 months (5.7 years)
Total Savings Over 30 Years: $12,926
About Mortgage Points Calculator
The Mortgage Points Calculator is an essential tool for homebuyers and homeowners to evaluate whether paying mortgage points is financially beneficial. Mortgage points (also called discount points) are fees paid upfront to the lender in exchange for a lower interest rate on your mortgage. Each point typically costs 1% of the loan amount and reduces your interest rate by approximately 0.25%, though the exact reduction varies by lender and market conditions.
Paying points can be a smart financial decision if you plan to stay in your home long enough to recoup the upfront cost through lower monthly payments. However, if you plan to move or refinance before reaching the break-even point, paying points may not be worth it. This calculator helps you determine the break-even point - the number of months it takes for your monthly savings to equal the upfront cost of the points - so you can make an informed decision.
This calculator shows you the upfront cost of points, the difference in monthly payments with and without points, the break-even point, and the total savings over the life of the loan. Understanding these numbers helps you determine whether paying points aligns with your financial goals and how long you plan to stay in the home. The calculator is particularly useful when comparing loan offers from different lenders or deciding whether to pay points to lower your interest rate.
When to Use This Calculator
- Loan Shopping: Compare loan offers with and without points
- Points Decision: Determine if paying points is worth it
- Break-Even Analysis: Calculate how long to recoup points cost
- Refinance Planning: Evaluate paying points when refinancing
- Financial Planning: Understand long-term savings from points
- Loan Comparison: Compare different points scenarios
Why Use Our Calculator?
- ✅ Break-Even Analysis: Calculate when points pay for themselves
- ✅ Cost Comparison: Compare upfront cost vs. long-term savings
- ✅ Accurate Calculations: Precise payment and savings calculations
- ✅ Free Tool: No registration or fees required
- ✅ Informed Decisions: Make better points decisions
- ✅ Mobile Friendly: Calculate on any device
Understanding Mortgage Points
Mortgage points are upfront fees paid to the lender to reduce your interest rate. Each point typically costs 1% of your loan amount and reduces your interest rate by approximately 0.25%, though the exact reduction varies. For example, on a $300,000 loan, one point costs $3,000 and might reduce your rate from 4.5% to 4.25%. Points are paid at closing and are tax-deductible in the year you pay them (consult a tax professional).
Whether paying points makes sense depends on how long you plan to stay in the home. If you stay past the break-even point, you'll save money overall. If you move or refinance before the break-even point, you'll lose money. Generally, paying points makes sense if you plan to stay in the home for at least 5-7 years, have the cash available, and want to minimize long-term interest costs. Not paying points makes sense if you plan to move soon, need to preserve cash, or prefer lower upfront costs.
Real-World Applications
Long-Term Homeowner: A buyer plans to stay in their home for 15+ years. Paying 2 points ($6,000) on a $300,000 loan reduces their rate from 4.5% to 4.0%, saving $90/month. Break-even is 67 months (5.6 years), and they'll save $16,200 over 30 years, making points a good investment.
Short-Term Homeowner: A buyer plans to move in 3-4 years. Paying 1 point ($3,000) saves $44/month, with a break-even of 68 months. Since they'll move before break-even, paying points doesn't make financial sense.
Refinance Decision: A homeowner refinancing a $400,000 loan can pay 1.5 points ($6,000) to reduce rate from 5.0% to 4.625%, saving $88/month. Break-even is 68 months. If they plan to stay 10+ years, points are worth it.
Important Considerations
- Points are paid upfront at closing and increase your closing costs
- Break-even point is when monthly savings equal the upfront cost of points
- Paying points makes sense if you plan to stay past the break-even point
- Points are tax-deductible in the year paid (consult a tax professional)
- Not all lenders offer the same point reduction - shop around
- Consider your cash availability and other financial priorities
Frequently Asked Questions
What are mortgage points?
Mortgage points (also called discount points) are upfront fees paid to the lender to reduce your interest rate. Each point typically costs 1% of your loan amount and reduces your interest rate by approximately 0.25%, though the exact reduction varies by lender.
Should I pay mortgage points?
Whether to pay points depends on how long you plan to stay in the home. If you'll stay past the break-even point (when monthly savings equal the upfront cost), paying points can save money. If you plan to move or refinance before break-even, points may not be worth it. Generally, points make sense if you plan to stay 5-7+ years and have the cash available.
What is the break-even point for mortgage points?
The break-even point is the number of months it takes for your monthly savings from the lower interest rate to equal the upfront cost of the points. For example, if points cost $3,000 and save you $50/month, the break-even point is 60 months (5 years). After this point, you start saving money.
Are mortgage points tax-deductible?
Yes, mortgage points are typically tax-deductible in the year you pay them, as long as they're paid for the purchase or improvement of your primary residence and meet certain IRS requirements. Points paid for refinancing are usually amortized over the life of the loan. Consult a tax professional for specific advice.
How much does each point reduce the interest rate?
Typically, each point reduces your interest rate by approximately 0.25%, though this varies by lender and market conditions. Some lenders may offer more or less reduction per point. Always ask your lender for the exact rate reduction before deciding to pay points.
Can I negotiate mortgage points?
Yes, you can often negotiate the cost and rate reduction of points with your lender. Different lenders may offer different point structures, so it's worth shopping around. You can also negotiate to have the seller pay for points as part of the purchase agreement, or ask the lender to reduce other fees in exchange for paying points.