Mortgage Discount Points Break-Even Calculator

Homebuyers and refinancers deciding whether to pay for discount points at closing. Points lower your interest rate — but only pay off if you keep the loan long enough to recoup the upfront cost.

One discount point costs 1% of your loan amount and typically lowers your rate by roughly a quarter percent (lenders vary). That lower rate cuts your monthly payment. Divide the points' upfront cost by the monthly savings and you get the break-even month.

Before the break-even point, you're behind — you spent more up front than you've saved. After it, every month is pure savings. So the decision hinges on whether you'll keep this loan, at this rate, past break-even.

Points favor buyers who'll stay put and keep the same loan for many years — long past the break-even month. They're a poor bet if you expect to sell or refinance soon, or if you could put that cash toward a larger down payment or higher-return investment.

The exact rate reduction per point varies by lender and market, so enter the actual quoted rate with points. This assumes a fixed rate held to term and ignores the opportunity cost of the upfront cash. Discount points may be tax-deductible in some cases — check with a tax professional.