Mortgage Points Break-Even Calculator
Figure out if paying for discount points at closing is actually worth it. Compare your payment with and without points, see the break-even month, and calculate true lifetime interest savings.
What Are Mortgage Discount Points?
A mortgage discount point is an upfront fee paid to the lender at closing in exchange for a lower interest rate over the life of the loan. One point equals 1% of the loan amount — so on a $400,000 mortgage, one point costs $4,000 and typically reduces the rate by about 0.25 percentage points. Points are essentially prepaid interest, and the IRS lets you deduct them on your federal return if you itemize, which reduces their true cost.
The break-even point is the month at which your accumulated monthly savings equal the upfront cost of the points. Stay in the loan past that month and every dollar of reduced interest is pure savings. Sell or refinance before it and buying points was a bad trade.
How the Calculation Works
This calculator computes two standard amortization payments: one at the base rate and one at the discounted rate (base rate minus points times reduction per point). The difference is your monthly savings. Divide the after-tax cost of points by monthly savings to get the break-even month. We also show lifetime interest for both scenarios so you can see the total dollars saved if you hold the loan to maturity. Because points are deductible, we adjust the upfront cost by your marginal federal tax bracket — a $8,000 points purchase in the 24% bracket has a true net cost of about $6,080.
Rule of thumb: if your break-even month is under 60 months and you plan to keep the loan at least that long, buying points usually wins. On a 30-year loan held to maturity, 2 points at 0.25% rate reduction can save $30,000 to $60,000 in total interest depending on balance.
When Buying Points Makes Sense
Points work best when you plan to keep the mortgage for 7 or more years, you have cash at closing without draining your emergency fund, and you itemize deductions so the IRS subsidizes part of the cost. They are especially powerful on larger loans because the dollar savings scale with balance. Points rarely pay off if you expect to move, refinance, or pay off the loan within 5 years, or if the seller is offering to cover closing costs anyway.
Always ask the lender for the exact rate-reduction table — some lenders offer 0.375% per point on jumbo loans, while others cap at 0.125%. Also shop at least 3 lenders the same day to compare Loan Estimates, because origination fees and points interact. Last updated April 2026.