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Mortgage Points vs No Points Calculator

Enter the loan, both rates and the points cost to see whether buying points pays off.

How it is calculated

For each rate the tool computes the standard fixed-rate payment M = P·i / (1 − (1+i)−n), where P is the loan amount, i the annual rate divided by 100 and by 12, and n the term in years times 12. The cost of points is loan × points / 100, paid upfront and not added to the loan. Then monthly savings = Mno points − Mpoints, break-even = points cost / monthly savings in months, and lifetime savings = (Mno − Mpts) × n − points cost. Lifetime savings assume you keep the loan to the end of the term and ignore the time value of money. If the points do not lower the payment, break-even shows a dash and lifetime savings are negative. Fees other than points, taxes and insurance are not included.

Worked example

A 300,000 loan over 30 years (360 payments). Without points the rate is 6.5%, giving $1,896.20 a month. With 1 point the rate is 6.0%, giving $1,798.65. One point costs 1% of 300,000 = $3,000.00. Monthly savings: 1,896.20 − 1,798.65 = $97.55. Break-even: 3,000 / 97.55 = 30.8 months, a little over two and a half years. Over the whole 360 months the savings add up to about 35,119, and after subtracting the $3,000 upfront cost the lifetime savings are $32,118.90.

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Common mistakes

  • Using the break-even as a guarantee. If you sell or refinance before month 31 in this case, you lose money on the points, so compare the break-even to how long you really expect to keep the loan.
  • Entering the points as a dollar amount. The field takes the number of points, where 1 means 1% of the loan, so $3,000 on a $300,000 loan is entered as 1.
  • Putting the same rate in both rate fields, or swapping them. The "with points" rate must be the lower one, otherwise monthly savings are negative and break-even shows a dash.
  • Entering rates as decimals such as 0.065. The tool expects percent, so type 6.5.
  • Treating lifetime savings as pure profit. It does not account for what the upfront money could have earned elsewhere, and it counts only principal and interest payments.

Sources

About this calculator

Mortgage discount points let a borrower pay money upfront — typically 1 point = 1% of the loan amount — in exchange for a lower interest rate over the life of the loan. Whether that trade pays off depends on the break-even point: how many months of lower payments it takes for the accumulated savings to equal the upfront cost of the points, calculated as points cost ÷ monthly payment savings.

Homebuyers and people refinancing use this comparison to decide whether to buy down their rate or take the higher no-points rate, weighing the break-even timeline against how long they actually expect to keep the loan; loan officers use the same math to present the trade-off clearly to clients.

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Comments (1)

  • Editorial team

    If your lender offers several point levels, run each one with its own quoted rate and compare the break-even months side by side. With the starting numbers, 2 points cost 6,000, save 99.70 a month and break even at 60.2 months, about five years; the lifetime saving only appears if you keep the loan for all 30 years. How long do you expect to stay in the home, and what rates are you being quoted?

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