Mortgage Points Calculator

Trade cash at closing for a lower payment

Discount points are upfront charges connected to a lower mortgage interest rate. One point equals 1% of the loan amount. The point does not have a standard rate reduction, so the calculator requires the actual rate with points and the actual rate without points.

For each rate, it calculates the fixed principal-and-interest payment on the same loan amount and term. Monthly savings is:

payment without points − payment with points

Simple break-even is:

point cost ÷ monthly savings

If the points do not reduce the payment, no break-even exists.

Worked example

Compare a $300,000, 30-year mortgage at 6.75% with zero points against 6.5% with one point. The point costs $3,000. The lower rate reduces monthly principal and interest by a little more than $40.

Dividing $3,000 by the monthly savings produces a break-even a little beyond five years. If the mortgage remains in place for ten years, gross payment savings exceed the point cost under the simple model. If the borrower sells or refinances in three years, the point has not been recovered.

Use actual Loan Estimates issued close together. Comparing different lenders, lock periods, loan types, or fees can make the point calculation appear better or worse for reasons unrelated to the buydown.

Break-even is necessary but not complete

The simple method ignores what the upfront cash could earn elsewhere and does not compare mortgage balances at the exit date. It also assumes the scheduled payment is made and the mortgage remains unchanged.

Consider:

• expected time before selling, refinancing, or paying off;
• emergency cash remaining after closing;
• other lender charges and credits;
• whether the two offers have identical features; and
• the likelihood that rates create a future refinance opportunity.

The CFPB recommends comparing multiple timeframes: a shorter case, longer case, and most likely case. Change the expected-stay input instead of relying on one date.

Points, origination charges, and lender credits

Not every fee labeled “point” reduces the interest rate. On the Loan Estimate and Closing Disclosure, discount points connected to the rate should be identified. Lender credits reverse the trade: less cash at closing in exchange for a higher rate and payment.

Use the refinance calculator when replacing an existing mortgage and the mortgage amortization calculator to inspect the balance and interest path.

Model limitations

The result compares principal-and-interest payments only and does not include opportunity cost, tax treatment, balance differences at sale, escrow, mortgage insurance, changing rates, or other fees. It is an educational break-even estimate, not a lender quote or recommendation.