Points are prepaid interest. Find the month your rate buydown finally pays for itself — and whether you will still own the loan by then.
Enter both quoted rates to find your break-even point.
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Discount points are prepaid interest: you pay about 1% of the loan amount up front in exchange for a rate roughly 0.125-0.25% lower. This calculator finds the exact month your cumulative payment savings surpass the points cost, then quantifies net benefit or loss based on how long you expect to keep the loan. Model your full payment first with our mortgage calculator.
Buyers choosing between lender rate sheets, refinancers deciding whether to pay points on a new loan, and anyone expecting to move, sell, or refinance within a few years. It matters most when you have spare closing cash but want proof the buydown pays off.
Example Input
Loan: $400,000. Rate without points: 6.75%. Rate with 1 point (cost $4,000): 6.5%. Planned stay: 6 years.
Sample Output
Payment falls from ~$2,594 to ~$2,528, saving ~$66/month. Break-even: ~61 months (~5.1 years). Staying 6 years nets roughly $2,750 in savings after recouping the cost.
Example Input
Same loan but planned stay: 3 years.
Sample Output
Break-even needs ~61 months, so selling at month 36 means you are still ~$1,650 out of pocket. The calculator correctly advises choosing the zero-point rate.
Comparing two official Loan Estimates side by side; deciding between seller-paid credits toward points versus a price cut; checking whether a temporary 2-1 buydown beats permanent points; and stress-testing plans like relocating for work within three years.
Enter the loan amount, both quoted rates, the dollar cost of the points (points x loan amount), and your honest holding-period estimate. Break-even months = points cost divided by monthly payment savings. One discount point equals 1% of the loan and typically buys 0.25% off the rate, though pricing varies daily.
People forget points are paid at closing, killing liquidity that an emergency fund might need. This model assumes you keep the loan past break-even, ignores tax treatment differences (points may be deductible when purchased on a primary home purchase), and excludes escrow items, which points do not affect.
Typically 0.25%, but it varies with market pricing, loan size, credit score, and occupancy. Always price points against your specific Loan Estimate; this calculator accepts whatever spread your lender actually quotes.
No. Points are prepaid interest and are generally not refunded when you sell or refinance ahead of break-even. That is exactly why your realistic holding period is the decisive input here.
Points paid on a purchase of a primary residence are often fully deductible in the year paid; refinance points usually must be amortized over the loan term. Deductibility depends on itemizing and current IRS rules, so confirm with a tax professional.
Break-even depends on the points cost, loan amount, rate reduction, monthly savings, and how long you keep the loan. A lower rate is not automatically worthwhile if you sell, refinance, or move before the modeled break-even month.
Instant, ad-light, and private: the math runs entirely in your browser with nothing transmitted to servers. Works on any modern browser and screen size, so you can compare lender sheets in real time, even standing at the open house.
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