Mortgage points calculator

What are mortgage points?

Discount points are fees paid at closing to lower the interest rate. One point equals one percent of the loan: one point on a $100,000 loan is $1,000 (CFPB).

How much does a point lower the rate?

There is no fixed amount — it depends on the lender, the kind of loan and the market (CFPB). Get the rate with and without points from your lender and enter both.

How do I find the break-even point?

Divide the cost of the points by the monthly savings. In a CFPB example, 0.375 points ($675) on $180,000 lowers the rate from 5% to 4.875% and saves about $14 a month — about 50 months to break even.

When are points worth it?

If you keep the loan past the break-even point. If you might sell or refinance sooner, the points may cost more than they save.

Do points count in the APR?

Yes — points are finance charges, so they raise the APR. The APR calculator shows the effect.

What are lender credits?

They work in reverse. You accept a higher interest rate and the lender reduces your upfront closing costs; some lenders call them negative points. The CFPB suggests that if you are unsure how long you will keep the loan or when you might refinance, you consider paying no points or taking credits.

Are mortgage points tax deductible?

Sometimes. The IRS treats points as prepaid interest. Points on a loan to buy, build or improve your main home may be deducted in full in the year you pay them if you itemize and meet the IRS conditions; points on a refinance or a second home are generally deducted over the life of the loan. See Publication 936 or ask a tax professional.

How the break-even is calculated

The calculator computes the monthly payment twice, once at the original rate and once at the lower rate, over the same term. The difference is the monthly saving. The cost of the points is the loan amount × the number of points ÷ 100. Dividing the cost by the saving and rounding up gives the break-even in months. The lifetime figure is the saving over the whole term minus the cost, in plain dollars, with no adjustment for what the cash could have earned elsewhere.

Worked example: $180,000, 5% or 4.875% with 0.375 points

The points cost $180,000 × 0.375 ÷ 100 = $675. Principal and interest is $966.28 a month at 5% and $952.57 at 4.875%, a saving of $13.70. $675 ÷ $13.70 is 49.3, so the break-even is month 50, or 4 years and 2 months. Leave after 3 years and the points have cost $182 more than they saved; leave after 5 years and you are $147 ahead; keep the loan for all 30 years and the saving is about $4,258 after the cost.

Common mistakes

Judging points only by the lower payment, without the cash they cost at closing, is the first; that money could instead be a larger down payment or a reserve. Ignoring how long you will keep the loan is the second: a sale or refinance before the break-even month turns the points into a loss. Mixing points with lender credits is the third, since a credit has the opposite effect, a higher rate for lower closing costs. Compare Loan Estimates for the same loan type, where points appear on page 2, Section A.

Sources: CFPB, How should I use lender credits and points (also called discount points)? (reviewed October 19, 2023): what a point costs, the example used here, lender credits and where both appear on the Loan Estimate; IRS, Topic no. 504, Home mortgage points (reviewed September 24, 2026), and Publication 936. The break-even arithmetic divides the cost of the points by the monthly saving. See the mortgage calculator, the APR calculator, the refinance calculator and the loan comparison calculator.

Estimates for planning only — not financial or tax advice. Your lender, plan or tax professional decides. How we check our calculators.