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.
Frequently Asked Questions
Is it always worth buying mortgage points?
No. Points only pay off if you hold the loan past the break-even month — typically 4 to 7 years. If you might sell or refinance sooner, skip them and keep the cash liquid.
How much does one point reduce the rate?
On most conforming 30-year loans, one point reduces the rate by about 0.25 percentage points. The exact amount varies by lender, loan type, and market — always confirm on the Loan Estimate.
Are mortgage points tax deductible?
Yes, discount points on a purchase mortgage for your primary home are fully deductible in the year paid if you itemize. Points on a refinance must be deducted ratably over the life of the loan.
How do I calculate break-even on points?
Divide the after-tax cost of points by the monthly payment savings. For example, $8,000 in points at a 24% tax bracket has an after-tax cost of $6,080. If points save you $120 per month, break-even is roughly 51 months.
Can I roll points into the loan?
Some lenders allow it, but doing so defeats the purpose — you pay interest on the points themselves. Points work best when paid in cash at closing, especially from seller credits or closing-cost credits.
Is this calculator private?
Yes. All calculations run locally in your browser. Nothing is sent to a server.