Mortgage Discount Points ROI Calculator
Calculate the real return on investment from buying mortgage discount points — break-even month, lifetime interest saved, and annualized ROI compared to keeping the cash invested elsewhere. Updated for 2026 rates.
| Upfront Cost | |
| Points Cost | — |
| Monthly Savings | |
| Payment Without Points | — |
| Payment With Points | — |
| Monthly Savings | — |
| Holding Period Math | |
| Total Saved Over Hold Period | — |
| Opportunity Cost (alt investment) | — |
| Net Benefit After Opportunity Cost | — |
How Discount Points ROI Math Actually Works
A mortgage discount points ROI calculator compares the upfront cost of buying points against the lifetime monthly savings, while adjusting for what that same cash could earn invested elsewhere (opportunity cost). Each discount point costs 1% of the loan amount and typically lowers the rate by 0.125-0.25% (source: cfpb.gov). The "simple" break-even — cost ÷ monthly savings — ignores the time value of money. This tool computes the true after-opportunity-cost ROI.
For example, paying $8,000 to drop a $400,000 loan rate from 6.75% to 6.00% saves about $194 per month. Simple break-even is 41 months. But if that $8,000 could have earned 5% in a HYSA over the holding period, the real break-even pushes out to roughly 50 months. Whether points are worth it depends entirely on how long you keep the loan before selling, refinancing, or paying off.
2026 Rate Environment and Points Pricing
With 30-year fixed rates near 6.5-7.0% in early 2026 per Freddie Mac PMMS (source: freddiemac.com/pmms), lender point structures vary widely. Aggressive lenders may drop the rate 0.25% per point, while conservative ones charge 1.5-2 points per quarter-percent. Always ask for the specific rate-to-point ratio in writing before deciding. Higher base rates make points modestly more attractive because each basis point cut translates into bigger absolute monthly savings.
Tax treatment also matters. Points on a primary-residence purchase are generally fully deductible in the year paid, while points on a refinance must be amortized over the loan term per IRS Publication 936 (source: irs.gov/publications/p936). Adjust the after-tax cost in your decision: a $8,000 point cost at the 24% bracket is effectively $6,080 net.
The Break-Even Question vs the ROI Question
Most articles ask only "when do I break even?" That is the wrong question. The better question: what is the annualized return on the upfront cash, and does it beat my next-best alternative? If buying points yields an annualized ROI of 4% over my expected holding period, but I can earn 5% in Treasury bills, points are a worse investment even though they "save money."
The annualized ROI is calculated by treating the upfront cost as the initial investment and the stream of monthly savings as cash flows, then solving for the internal rate of return. This calculator computes a simplified annualized return suitable for comparing against passive alternatives like a high-yield savings account, Treasury bills, or a CD ladder. See our CD laddering calculator and Treasury yield calculator for current alternative rates.
When Points Make Sense in 2026
Points typically make sense when you plan to keep the loan at least 7-10 years, the rate environment is unlikely to drop meaningfully (locking in a low rate now is more valuable), and your alternative investment yields are modest. Points rarely pay off if you might refinance within 5 years, you may sell within 5 years, or you can earn 6%+ risk-free elsewhere. To stress-test the refinance angle, run our refinance savings calculator with hypothetical lower rates and see if the math still holds.
Last updated April 2026. Sources: cfpb.gov, freddiemac.com, irs.gov.