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Are mortgage points worth it for me?

Type the loan, the rate with no points, the points you would buy and the lower rate they get you. The mortgage points calculator shows what the points cost, the monthly saving, the month you break even, and the net saving over the years you keep the loan.

Your numbers

Months to break even
60

The points cost $3,000.00 and save $50.11 a month, so they pay for themselves after 60 months.

Cost of the points
$3,000.00
Monthly payment, no points
$1,995.91
Monthly payment with points
$1,945.79
Monthly saving
$50.11
Net saving over the years you keep it
$3,013.58
Years to break even
5
Worth it?
Yes, if you keep the loan at least 60 months.

Months to break even: 60. The points cost $3,000.00 and save $50.11 a month, so they pay for themselves after 60 months.

Savings minus the cost of the points, month by month

The results are estimates for information only. They are not financial, tax, or legal advice. Check the numbers with your lender or a qualified professional before you decide. Terms of use

How to calculate

Computes what mortgage discount points cost, the monthly payment with and without them, the monthly saving, the months to break even, and the net saving over the years you keep the loan.

Example with the default inputs (Loan amount $300,000.00, Loan term (years) 30, Rate with no points 7%, Points to buy 1, Rate with the points 6.75%, Years you keep the loan 10): The points cost $3,000.00 and save $50.11 a month, so they pay for themselves after 60 months.

Method: Cost = loan × points ÷ 100; payment = P·r ÷ (1 − (1 + r)^−n) with r = rate ÷ 12 and n = years × 12; saving = payment without points − payment with points; break-even = cost ÷ saving, rounded up; net = saving × 12 × years kept − cost.

  • One point costs 1% of the loan amount (CFPB).
  • Fixed-rate loan with monthly payments; both rates are the ones your lender quotes you (type them).
  • The comparison uses monthly payments only: no interest on the cash you pay for the points, no taxes.

Machine-readable copies: Markdown, JSON.

Worked examples

Each example is checked against the calculator on every build.

  1. Loan amount $300,000.00, Loan term (years) 30, Rate with no points 7%, Points to buy 1, Rate with the points 6.75%, Years you keep the loan 10 gives Cost of the points $3,000.00, Monthly payment, no points $1,995.91, Monthly payment with points $1,945.79, Months to break even 60.Source: CFPB, How should I use lender credits and points? (one point equals one percent of the loan amount), https://www.consumerfinance.gov/ask-cfpb/what-are-discount-points-and-lender-credits-and-how-do-they-work-en-136/
  2. Loan amount $100,000.00, Loan term (years) 30, Rate with no points 6%, Points to buy 1.375, Rate with the points 5.75%, Years you keep the loan 5 gives Cost of the points $1,375.00, Months to break even 87.Source: CFPB, How should I use lender credits and points? (1.375 points on a $100,000 loan is $1,375), https://www.consumerfinance.gov/ask-cfpb/what-are-discount-points-and-lender-credits-and-how-do-they-work-en-136/
  3. Loan amount $200,000.00, Loan term (years) 15, Rate with no points 0.5%, Points to buy 0.5, Rate with the points 0%, Years you keep the loan 15 gives Cost of the points $1,000.00, Monthly payment with points $1,111.11, Monthly payment, no points $1,153.53, Months to break even 24.Source: CFPB, How should I use lender credits and points? (0.5 points on $100,000 is $500, so on $200,000 it is $1,000), https://www.consumerfinance.gov/ask-cfpb/what-are-discount-points-and-lender-credits-and-how-do-they-work-en-136/

How it works

  • Cost of the points = loan amount × points ÷ 100 (one point is 1% of the loan, CFPB).
  • Monthly payment (principal and interest) at a yearly rate R: P × r ÷ (1 − (1 + r)⁻ⁿ), with P the loan amount, r = R ÷ 1200 the monthly rate, and n = term in years × 12. At a 0% rate the payment is P ÷ n.
  • Monthly saving = payment with no points − payment with points.
  • Months to break even = cost of the points ÷ monthly saving, rounded up to a whole month. Years to break even = that whole number of months ÷ 12.
  • Net saving over the years you keep it = monthly saving × 12 × years kept − cost of the points. It is negative when you leave before the break-even month.
  • Worth it? Yes when the points cost $0 (the lower rate costs nothing up front; the break-even month is 0). Otherwise no when the break-even month is after the last month of the term; yes when it is on or before the last month you keep the loan (years kept × 12); otherwise no.
  • The chart draws monthly saving × month − cost for every month of the term and marks the break-even month.

Rules. The rate with points must be lower than the rate with no points, and you cannot keep the loan longer than its term. When the two rates are so close that the payments come out equal, there is no saving to break even with. Each of these gives no answer and a message.

Exact arithmetic. The cost of the points is computed exactly from the decimals you type (loan × points ÷ 100). The payments use powers of (1 + r), so they and everything built from them are decimal numbers; payments are not rounded to cents before they are subtracted.

Output format. Money shows in dollars and cents, rounded half up. Months show as a whole number and years with 1 decimal.

Assumptions

  • A fixed-rate loan with equal monthly payments for the whole term (1 to 40 years); rates from 0% to 30%; points from 0 to 10; the loan from $1,000 to $100,000,000.
  • No live rates: both rates are the ones your lender quotes.
  • The comparison is of monthly payments only. It leaves out interest you could earn on the cash, taxes, and paying the loan off early.

Worked examples by hand

$300,000 for 30 years, 1 point lowers 7% to 6.75%, kept 10 years. Cost 300,000 × 1 ÷ 100 = $3,000. At 7%: r = 0.0058333, n = 360, payment $1,995.91. At 6.75%: $1,945.79. Saving $50.11 a month. 3,000 ÷ 50.11 = 59.86, so 60 months (5 years). Net after 10 years: 50.11 × 120 − 3,000 = $3,013.58.

$100,000 for 30 years, 1.375 points lower 6% to 5.75% (CFPB’s $1,375). Payments $599.55 and $583.57, saving $15.98. 1,375 ÷ 15.98 = 86.06, so 87 months. Kept only 5 years (60 months), the points do not pay off.

$200,000 for 15 years, 0.5 points lower 0.5% to 0%. Cost $1,000. At 0% the payment is 200,000 ÷ 180 = $1,111.11; at 0.5% it is $1,153.53. Saving $42.42; 1,000 ÷ 42.42 = 23.57, so 24 months.

Other questions people ask

What are mortgage points?

Discount points are a fee you pay the lender at closing for a lower interest rate. The CFPB says one point equals one percent of the loan amount: one point on a $100,000 loan is $1,000. Points do not have to be whole numbers; 0.375 points on $100,000 is $375.

How do I know if buying points is worth it?

Divide the cost of the points by the monthly saving to find the break-even month. If you keep the loan longer than that, the points save money; if you sell or refinance sooner, they cost more than they save. One point at $300,000 that lowers 7% to 6.75% saves $50.11 a month and breaks even in month 60.

How much does one point lower the rate?

It depends on the lender and the market, so this calculator does not guess. Ask your lender for the rate at zero points and with the points you are thinking about, then type both. The CFPB suggests comparing offers with the same points at different lenders.

Are points the same as the origination fee?

No. Discount points buy a lower rate. An origination fee pays the lender for making the loan and does not lower the rate. Both show on your Loan Estimate.

What are lender credits?

The opposite of points: the lender pays part of your closing costs and you take a higher rate. Your payment goes up but you bring less cash to closing.

Does the break-even include interest on the cash I pay?

No. The calculator compares the monthly payments only. Money you pay for points could have earned interest or paid down the loan, so the true break-even is a little later.