Mortgage Points Calculator
Calculate the value of buying mortgage points vs. lower interest rates
1 point = 1% of loan amount
What Are Mortgage Points?
Mortgage points (also called discount points) are fees you pay upfront to your lender to reduce your interest rate. One point costs 1% of your loan amount. For example, on a $300,000 loan, one point costs $3,000.
Typically, each point reduces your interest rate by 0.25%, though this varies by lender and market conditions.
When Should You Buy Points?
- Long-term ownership: If you plan to stay in the home beyond the break-even point
- Extra cash available: You have funds for closing costs without depleting savings
- High interest rates: When rates are elevated, points provide more value
- Tax benefits: Points may be tax-deductible (consult a tax advisor)
When to Skip Points
- Short-term ownership: Planning to sell or refinance within a few years
- Tight budget: Need cash for emergency fund or home repairs
- Low rates: When rates are already low, points provide less benefit
- Better investments: If you can earn more investing elsewhere
How to Use This Calculator
Buy Points Mode: Enter your loan details to see if buying points makes financial sense based on how long you plan to own the home.
Break-Even Mode: Calculate exactly when you'll recoup the cost of points and see a year-by-year savings timeline.
Key Considerations
- Break-even point: The number of months until savings equal the cost of points
- Opportunity cost: Could the upfront cash generate better returns elsewhere?
- Tax deductibility: Points are often tax-deductible in the year paid
- Lender variations: Rate reductions per point vary—shop around
- Refinancing risk: If you refinance, you lose remaining point value