Mortgage Points Break-Even Calculator
Compare buying discount points vs keeping the higher rate: both monthly payments, the exact break-even month, and net savings if you hold the loan full term.
Mortgage discount points are prepaid interest: a fee paid at closing — one point costs 1% of the loan amount — in exchange for a lower rate for the life of the loan. Whether the trade pays off is a break-even question. The points cost a fixed amount today; the lower rate pays you back a fixed amount every month. Divide the cost by the monthly saving and you get the break-even month — the point at which the purchase has earned itself back. Keep the loan longer and every further month is profit; sell or refinance sooner and part of the fee is simply lost.
This calculator takes both quoted rates — with points and without — computes both monthly payments, and reports the monthly saving, the exact break-even month, and the net saving if you hold the loan to the end of its term. It asks for the rates rather than assuming a conversion because, as the CFPB notes, there is no standard amount of rate that one point buys — it varies by lender, loan type, and market conditions, so the only honest input is the actual pair of offers on your quote.
How it's calculated
Three lines, in order:
Monthly savings = payment at base rate − payment at bought-down rate
Break-even months = points cost ÷ monthly savings
Net full-term savings = monthly savings × term − points cost
Both payments come from the standard annuity formula,
Payment = P · r / (1 − (1 + r)−n), applied to the
same loan amount and term — only the rate differs. Full formulas are on
our methodology page. For what points and
lender credits are and how lenders price them, the CFPB's explainer on
discount points and lender credits
is the primary reference.
Worked example: $4,000 to buy a $400,000 loan from 7.00% to 6.75%
Take the calculator's default scenario: a $400,000 30-year loan, quoted at 7.00% with no points or 6.75% for one point ($4,000). The payment drops from $2,661.21 to $2,594.39 — a saving of $66.82 a month — so break-even lands at 4,000 ÷ 66.82 ≈ 59.9 months: month 60, five years in. Here is the net position at different exit points, computed with the same engine as the tool above:
| If you keep the loan… | Savings accumulated | Net position |
|---|---|---|
| 2 years (24 mo) | $1,603.62 | −$2,396.38 |
| 3 years (36 mo) | $2,405.43 | −$1,594.57 |
| 5 years (60 mo) | $4,009.06 | +$9.06 |
| 10 years (120 mo) | $8,018.11 | +$4,018.11 |
| 20 years (240 mo) | $16,036.22 | +$12,036.22 |
| Full term (360 mo) | $24,054.33 | +$20,054.33 |
The table is the whole decision structure in one column: the trade loses money for five years, breaks even almost to the month at year five, and then earns $66.82 for every month after — $20,054.33 if the loan runs its full term. The same math scales to bigger trades: two points ($8,000) buying the rate down to 6.50% saves $132.94 a month, breaks even in month 61, and nets $39,857.64 over the full term. Note that the break-even month barely moved — doubling the cost roughly doubled the saving — so the real question in both cases is identical: will you still hold this loan in five years? Enter your own quote above to find your version of that month.
When should you use this calculator?
Use it when a Loan Estimate offers the same loan at two prices — a rate with points and a rate without — and you want the trade reduced to two comparable numbers: the month it breaks even and what it is worth if you stay. It works for fractional points and for comparing lenders whose point pricing differs, and it is equally useful in reverse: if a lender offers a credit for taking a higher rate, the same math shows what the credit costs per month. Run it next to the refinance break-even calculator when the points question is part of a refinance, and the amortization schedule calculator to see either rate's full payment schedule.
The calculator answers the cost question only. How long you will actually keep the loan, where rates go next, and whether the $4,000 has a better use than buying rate — those judgments stay with you.
Assumptions and limitations
- Both loans share the same amount and term; only the rate differs. If the points also change the loan structure, compare full Loan Estimates instead.
- Both rates are assumed fixed for the full term. Adjustable-rate loans and temporary buydowns (2-1 buydowns and similar) are not modeled.
- Break-even is computed in nominal dollars — no discounting and no investment return on the $4,000 you could have kept. Counting opportunity cost pushes the true break-even somewhat later.
- Points paid at closing are assumed paid in cash. Financing the points into the loan means paying interest on them, which also delays break-even.
- Tax treatment is excluded. Points may be deductible as prepaid interest under the rules in IRS Topic 504 (see the FAQ below), which can shorten the effective break-even for itemizers.
- Prepaying or recasting the loan changes the payment path and with it the realized savings; the model assumes the scheduled payment throughout.
This page is educational content about how discount-point break-even math works. It is not financial advice and does not consider your personal circumstances. For decisions that matter, consult a qualified professional.
Last reviewed: 2026-07-09