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Mortgage Points Calculator

Find the cost of mortgage points.

How it is calculated

One discount point costs 1% of the loan, so cost = loan × points ÷ 100. The tool also gives a rough estimate of the rate cut it buys, using the rule of thumb of 0.25 percentage points per point: reduction = points × 0.25. The loan must be above zero and points cannot be negative; fractional points such as 0.5 are fine. The 0.25 figure is only an average used for this estimate. Real lenders quote different reductions, so check your loan estimate. The tool does not calculate the monthly payment saving or the break-even time.

Worked example

On a 300,000 loan you buy 2 points. Cost: 300,000 × 2 ÷ 100 = $6,000.00. Estimated rate reduction: 2 × 0.25 = 0.50%, so a 6.50% rate would become about 6.00%. You pay $6,000.00 upfront for an estimated cut of 0.50 percentage points.

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Common mistakes

  • Reading "0.50%" as a 0.5% cut of the rate. It is 0.50 percentage points off the rate, so 6.50% becomes 6.00%, not 6.47%.
  • Treating the 0.25 per point as guaranteed. Lenders set their own pricing, and the actual reduction can be smaller or larger.
  • Entering the points as a money amount or as 0.02. Enter 2 for two points, because the tool already divides by 100.
  • Looking only at the upfront cost. Points pay off only if you keep the loan long enough for the lower payments to recover the fee, so compare the break-even time.

Sources

About this calculator

This calculator finds the upfront cost of mortgage discount points — cost = loan amount × points% — where each point typically costs 1% of the loan and, in exchange, buys down the interest rate by roughly 0.25%, though the exact trade varies by lender. Paying points shifts cost from the life of the loan (higher rate, more interest over time) into an upfront lump sum at closing (lower rate, less interest over time).

Homebuyers use this cost and rough rate cut as the starting point for a break-even analysis — how many months of lower payments it takes to recoup the upfront cost, which this tool does not calculate — before deciding whether buying points makes sense given how long they expect to keep the loan. Mortgage brokers and loan officers use it to present rate options clearly to clients, and financial advisors use it when comparing a lower-rate, points-paid loan against a no-points loan with a higher rate.

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Comments (1)

  • Editorial team

    The tool shows the upfront cost and a rough rate cut, but whether points pay off depends on how long you keep the loan. Take the monthly saving from your lender's quote and divide the cost by it. At $6,000 and a saving of $100 a month, break-even is 60 months, so the points only help if you stay at least five years. What saving does your loan estimate show?

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