Mortgage Rate Buydown Break-Even Calculator

Discount points are prepaid interest that buys down your mortgage rate. Each point costs 1% of the loan amount and typically reduces the rate by about 0.25% (varies by lender and market). The break-even is the number of months you must hold the loan for the monthly payment savings to exceed the upfront point cost. Below break-even, you lose money; above it, you save money for every additional month.

Calculating Break-Even

Break-even months = upfront point cost ÷ monthly payment savings. Example: $8,000 in points reduces your payment by $150/month. Break-even = 8,000 ÷ 150 = 53 months (~4.4 years). If you keep the loan longer than 4.4 years, points are profitable. Shorter than that, you lose money. The math is straightforward but assumes you keep the loan and rate environment doesn't change. If rates drop and you refinance, you lose any unrecovered point cost.

When Points Make Sense in 2026

Pay points when (a) you plan a long hold (7+ years for most break-even scenarios), (b) you don't expect rates to drop dramatically (because refinancing kills the point investment), and (c) you have the cash without depleting reserves. In 2026, with rates having stabilized after the 2022-2024 spike, points are more attractive than they were two years ago — the risk of imminent refinance is lower. Also remember: discount points on primary-residence purchase loans are typically tax-deductible in the year paid as mortgage interest, which accelerates the effective break-even by 25-37% depending on your tax bracket.

Last updated May 2026. Sources: CFPB Discount Points.