Mortgage Points Calculator
Calculate whether buying mortgage discount points saves money and how long to break even.
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Frequently Asked Questions
What are mortgage discount points?
Mortgage points are upfront fees paid to the lender in exchange for a lower interest rate. One point = 1% of the loan amount. On a $350,000 loan, one point costs $3,500 and typically reduces the rate by 0.20-0.25%. Points make sense if you plan to keep the loan long enough to recoup the upfront cost via monthly savings.
When is it worth buying mortgage points?
Buying points is worth it when: your break-even period (cost divided by monthly savings) is less than how long you plan to keep the loan. If you will refinance or sell within 5 years, points rarely make sense. If you are in your forever home with a 30-year loan and have cash available, points can save tens of thousands.
Are mortgage points tax deductible?
Yes — for your primary residence, mortgage discount points are generally deductible as mortgage interest in the year of purchase (if buying a home) or amortised over the loan life (if refinancing). Consult a tax professional as rules vary based on loan purpose, amount and use. Points on rental properties are typically deductible over the loan life.
Buying points on a $400,000 mortgage: the break-even
One discount point costs 1% of the loan and typically lowers the rate by about 0.25%. Whether it pays depends on one thing: how long you keep the loan. The table compares no points, one point and two points on a 30 year, $400,000 loan.
| Points bought | Cost at closing | Rate | Monthly payment | Monthly saving | Break-even | Saving over 30 years |
|---|---|---|---|---|---|---|
| 0 | $0 | 6.75% | $2,594.39 | |||
| 1 | $4,000 | 6.50% | $2,528.27 | $66.12 | 60 months | $23,803 |
| 2 | $8,000 | 6.25% | $2,462.87 | $131.52 | 61 months | $47,348 |
Break-even = cost of points / monthly saving. The rate reduction per point varies by lender and by day; 0.125% to 0.375% per point is the usual range in 2026.
Worked example
One point for $4,000 saves $66.12 a month. After 60 months the savings equal the cost; every month after that is profit, and over the full 30 years the point returns $23,803 for $4,000, about 6 times the outlay. Sell or refinance at month 36 and the point has returned $2,380 for $4,000, a loss of $1,620. The median US homeowner moves or refinances within about 8 years, so the bet pays for most people who keep the loan past 5 years and loses for the third who do not.
Points versus a bigger down payment
The same $4,000 as extra down payment on the no-points loan reduces the balance to $396,000 and the payment to $2,568.45, saving $25.94 a month. The point saves $66.12. On this loan at these rates the point is the better use of the cash if you stay past 5 years; the down payment is better if you might leave early, since it is never lost. If the down payment would push you across 20% and remove PMI, the down payment wins outright.
Negative points and lender credits
The trade works in reverse. Taking a rate 0.25% higher in exchange for a lender credit of about 1% of the loan ($4,000) lowers closing costs and raises the payment by about $66. That is the right choice for a buyer short on cash at closing or planning to sell or refinance within five years. Ask the lender for a quote at three rate levels and run each through the calculator above with your expected holding period.
Tax treatment
Points on a purchase mortgage for a primary residence are deductible in the year paid, if you itemize. With the 2026 standard deduction at $32,200 for joint filers, most borrowers do not itemize, so the deduction is worth nothing to them. Points on a refinance are deducted over the life of the loan. Seller-paid points are deductible by the buyer.