Mortgage Points Cost Calculator: Upfront Cost to Buy Down a Rate
Work out the upfront cost of mortgage discount points — the cash you pay at closing to lower your interest rate for the life of the loan.
Adjust the inputs and select Calculate for a full breakdown.
Compare Common Scenarios
How the numbers shift across typical situations for this calculator:
| Scenario | Points cost | Loan amount unchanged |
|---|---|---|
| 2 points on $400,000 | 8,000 | 392,000 |
| 1 point on $250,000 | 2,500 | 247,500 |
| 0.5 points on $600,000 | 3,000 | 597,000 |
| 3 points on $200,000 | 6,000 | 194,000 |
How This Calculator Works
Enter the loan amount and the number of points you are considering buying. The calculator multiplies the two to give the points cost. One point is 1% of the loan and typically lowers the rate by about 0.25%, though the exact rate cut varies by lender and loan program.
The Formula
Percentage of an Amount
Amount is the base value, Percentage is the rate applied to it
Worked Example
Buying 2 discount points on a $400,000 mortgage costs $8,000 upfront, in exchange for roughly a 0.5% lower rate (about 0.25% per point). On a 30-year loan, that rate cut typically saves $115 to $135 a month — so the points pay back in about 60 to 70 months.
Key Insight
Points are worth buying when you plan to keep the loan past the breakeven month. Most homeowners refinance or move well before 30 years, so the average loan life is under 8 years — and points break even somewhere between 5 and 8 years. If you might move or refinance sooner, the cash is better in your pocket.
When to buy points — the holding-period question
Mortgage points convert upfront cash to lower interest rate. The decision rule: buy points if you'll hold the loan longer than the break-even period. Break-even = points cost / monthly savings. For typical scenarios (1 point reducing rate by 0.25%), break-even is 60-80 months (5-7 years).
Median U.S. mortgage life: ~7-8 years before refinance or sale. This is similar to typical points break-even, making the decision close. The optimal strategy depends on individual plans: planning to stay 10+ years and not refinance suggests points are valuable; planning to refinance or move within 5 years suggests skipping points.
The hidden assumption: holding the loan to break-even depends on no refinance opportunity. If rates fall 1+ point during the holding period, the financial-optimal move is to refinance — which voids the original points value. Borrowers who bought 2 points to lower 7% rate to 6.5% in 2022 had no refinance window through 2024 — but if rates fall to 5% in 2025-2026, refinancing makes the original points investment worthless. Cash invested would have grown at the alternative return.
Tax treatment — points as deductible mortgage interest
U.S. tax law treats mortgage points as deductible interest. For purchase loans, points paid by the buyer are typically deductible in the year of payment (subject to itemization requirement, which under TCJA 2017 applies only to borrowers with high deductions). For refinance loans, points must typically be amortized over the loan life (~30 years) — a much smaller annual deduction.
For purchase loans, deducting points in year 1 provides a meaningful tax benefit. $4,000 of points × 24% marginal bracket = $960 tax savings. This reduces the effective points cost from $4,000 to $3,040, shortening the break-even period by ~24%.
Most borrowers in 2024 don't itemize (TCJA's $14,600 standard deduction beat itemized for many). For these borrowers, the points deduction provides no benefit. The break-even calculation should use the after-tax points cost only if you'll actually deduct (high state tax + high mortgage interest + charitable + medical itemizations totaling >$14,600). For most middle-income borrowers, this combination of factors doesn't apply, and the standard deduction wins regardless of points purchase.
Mortgage points break-even analysis (1 point lowering rate by 0.25%)
Reference break-even periods for buying 1 mortgage point. Buying makes sense if holding the loan beyond break-even.
| Loan amount | Point cost | Monthly savings | Break-even (months) | Break-even (years) |
|---|---|---|---|---|
| $200,000 | $2,000 | $30 | 67 | 5.6 |
| $300,000 | $3,000 | $45 | 67 | 5.6 |
| $400,000 | $4,000 | $60 | 67 | 5.6 |
| $500,000 | $5,000 | $75 | 67 | 5.6 |
| $750,000 | $7,500 | $112 | 67 | 5.6 |
| $1,000,000 | $10,000 | $150 | 67 | 5.6 |
Break-even is loan-amount-independent (cost and savings scale proportionally). For typical 30-year mortgage with 0.25% rate reduction per point, break-even is ~5.6 years. Always compare to your expected holding period; points typically only pay off if you stay in the loan beyond 6 years without refinancing.
Frequently Asked Questions
How is the cost of mortgage points calculated?
One point is 1% of the loan amount. Multiply the loan by the number of points. Two points on a $400,000 loan is $8,000.
How much does one point lower the rate?
Typically about 0.25%, though the exact reduction varies by lender, program, and market. Some lenders offer more aggressive buy-downs; others less.
When do mortgage points break even?
Divide the points cost by the monthly payment saved. A 60-month breakeven means the points pay back after 5 years of holding the loan — past that, the savings are pure benefit.
Are mortgage points tax deductible?
In the US, points on a primary-home purchase mortgage are usually deductible in the year paid if itemizing. Refinance points are typically deductible over the loan's life. Tax rules change — confirm with a current source.
Should I buy points if I might refinance?
Probably not. Points only pay off if you keep the loan past the breakeven, so refinancing or selling early wastes the upfront cost. Buy points when the loan is one you expect to keep for years.
When is this calculator unreliable?
When break-even decision ignores possibility of refinancing during holding period (if rates fall 1+ point during your holding period, refinancing wipes out the value of points already paid). Also unreliable when not accounting for opportunity cost (cash spent on points could be invested at 5-7% returns) or when tax deductibility differs from assumption (most middle-income U.S. borrowers post-TCJA take standard deduction, voiding the tax benefit of points).
References & Authoritative Sources
- Consumer Financial Protection Bureau (CFPB) — What Are Discount Points? · consulted June 1, 2026 · Federal consumer guidance on discount points
- U.S. Internal Revenue Service (IRS) — Publication 936: Home Mortgage Interest Deduction · consulted June 1, 2026 · Tax treatment of mortgage points
- Mortgage Bankers Association (MBA) — Mortgage Industry Data · consulted June 1, 2026 · Industry data on points usage and average holding periods
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Data Sources & Benchmarks
This calculator draws on 1 independent, dated source.
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Methodology & Review
Mortgage points cost equals loan amount × points percentage. The calculator returns dollar cost of points. One discount point = 1% of loan amount, typically reduces interest rate by 0.25%. The calculation determines whether buying points is economic: divide point cost by monthly savings to get break-even months. If you'll hold the loan longer than break-even, buying points saves money. For a $400K loan: 1 point = $4,000; saves ~$60/month; break-even at 67 months (5.6 years). Hold longer than 5.6 years and points save money. RELIABILITY: Reliable for direct break-even calculation. Less reliable as a forward decision tool because (a) most U.S. borrowers refinance or move before reaching break-even (median holding period 7-10 years for first home, 5-7 years for repeat), (b) interest rates change unpredictably (a rate drop creates refinance opportunity that voids points value), and (c) opportunity cost on the points cash (could be invested elsewhere at 5-7% returns).
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