Mortgage Points Calculator
A point costs one percent of the loan and buys a lower rate for as long as you hold it. That makes it a bet on time, not a discount: the money is spent today and returns slowly. This works out the break-even and compares it against how long you actually expect to keep the mortgage.
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Points are a bet on how long you stay
The cost is certain and immediate. The benefit arrives a few dollars at a time, every month, for as long as the loan lasts. Break-even is simply the point where those dollars have added up to what you paid, and everything after it is profit.
That is why the honest question is never “are points worth it” but “how long will I keep this mortgage”. The median American homeowner moves or refinances well before a thirty-year term is up, and points bought on the assumption of thirty years frequently return a fraction of their cost.
Refinancing counts as leaving
People allow for moving and forget refinancing. If rates fall two points in three years and you refinance, the buydown you paid for stops the day the old loan is repaid, exactly as if you had sold. Buying points when rates are historically high is therefore a worse bet than the arithmetic alone suggests, because the chance of refinancing away from the loan is high.
The rate cut per point is negotiable and often disappointing
A quarter of a point per point is the figure people quote. Lenders price it against their own cost of funds, and a quarter is the optimistic end; an eighth is common. It is worth asking for the actual number at several point levels before assuming, because the break-even moves sharply with it. The field above is there to be changed.
What else the money could do
Points compete with the down payment and with the emergency fund. A larger down payment can remove mortgage insurance entirely, which is often a bigger monthly saving than a quarter-point of rate. Cash kept aside costs nothing and can be spent on anything. Points are the least flexible of the three, and the only one you cannot undo.
A note on tax
In some jurisdictions discount points on a primary residence are deductible, sometimes in full in the year of purchase. Where that applies it shortens the break-even meaningfully. It varies enough by country and by circumstance that this calculator does not attempt it — ask someone who knows your tax position.
Frequently asked questions
What does one mortgage point cost?
One percent of the loan amount. On a $320,000 loan that is $3,200, paid at closing on top of the down payment and the other closing costs.
How much does a point lower the rate?
Commonly between an eighth and a quarter of a percentage point, set by the lender rather than by any rule. Ask for the actual figure at one, two and three points before deciding.
When are points a bad idea?
When you might move or refinance before break-even, when the cash would otherwise remove mortgage insurance, or when it would leave you without a reserve. The first is the most common and the easiest to underestimate.
Are points the same as origination fees?
No. Origination is what the lender charges to write the loan and buys you nothing. Discount points are optional and buy a lower rate. Both are quoted as a percentage of the loan, which is why they are so often confused.
Can the seller pay for points?
In many markets a seller concession can be applied to a buydown, and in a slow market it is one of the more achievable things to negotiate. It is worth asking, since it turns a bet on time into a straightforward gain.