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Discount Points Calculator

What buying down your rate actually costs, when it pays for itself, and whether you will hold the loan long enough for it to matter.

InputsPTS-1
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%
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pts

$4,000 up front buys $66.26 a month. Keep the loan past 5 yr 1 mo and you are ahead.

Break even after$4,000 up front
5 yr 1 mo
payment without points$2,607.70
payment with points$2,541.44
saved each month$66.26
true crossover, counting equity4 yr
points cost
$4,000
interest saved, 30 yr
$23,854
net if held to term
$19,854

On a $400,000 loan, one point costs $4,000 and buys a quarter-point rate reduction worth $66.26 a month. That repays itself in about 5 years 1 month — after which it is $66.26 a month of pure benefit.

Held the full 30 years it saves $23,854 in interest, a net $19,854 after the cost of the point. Rates shown are the Freddie Mac benchmark as of 2026-07-16; your lender sets how much rate a point actually buys.

The whole question is how long you keep the loan

Points are a trade: cash now for a lower payment later. That trade only pays off if you hold the loan past the break-even — about 5 years 1 month on the example above. Sell or refinance before then and the money is gone.

So the honest first question is not "is the rate better" — it obviously is — but how likely are you to still have this exact loan in 5 years 1 month? The median American mortgage does not survive that long, because people move and rates move. If you are confident you will stay, points are one of the few genuinely good deals in a closing package. If you are not, they are a bet on your own inertia.

Two break-evens, and why we show both

The figure lenders quote is the cost divided by the monthly saving — 5 years 1 month here. It misses something in your favour: the lower rate also sends slightly more of each payment to principal, so you owe less on the points-bought loan at any given month. Counting that equity, the true crossover is nearer 4 years.

It also misses something against you. The $4,000 spent on points could have been a larger down payment, an emergency fund, or invested. We do not model an assumed investment return — that would mean inventing a rate — but you should weigh it, especially if buying points would leave you short of cash after closing.

There is no fixed points-to-rate ratio

A quarter-point of rate per point paid is a common rule of thumb and nothing more. Lenders price points daily, differently by loan type and credit profile, and the same point can buy noticeably more or less rate at two lenders on the same day. That is why the rate reduction on this calculator is an input taken from your loan estimate, not a number we assume for you.

Compare against what a rate move is worth generally in our rate-move impact study, and see the whole payment with the mortgage calculator.

Common questions

What is a mortgage discount point?
An up-front fee that permanently lowers your interest rate. One point costs 1% of the loan — $4,000 on a $400,000 mortgage. How much rate it buys is set by the lender and changes daily, so take the reduction from your actual loan estimate rather than from a rule of thumb.
How do I know if buying points is worth it?
Compare the break-even to how long you will realistically keep the loan. On this example, $4,000 buys $66.26 a month, which repays itself in about 5 years 1 month. Sell or refinance before then and you lost money; keep it longer and every month after is profit.
Is the break-even lenders quote accurate?
It is conservative in one way and optimistic in another. It ignores that the lower rate also pays your balance down slightly faster, which brings the true crossover forward — to about 4 years here. But it also ignores that the money spent on points could have been invested or used as a larger down payment, which pushes the real answer back. We show both break-evens rather than picking one.
How much does one point lower the rate?
Commonly around 0.25%, but there is no fixed ratio — lenders price points differently every day and by loan type. That is why the rate reduction is an input on this calculator rather than an assumption baked into it. Get the exact figure from your loan estimate.
Are discount points tax deductible?
Points paid to buy down the rate on a primary residence purchase are often deductible in the year paid, and on a refinance are typically deducted over the life of the loan. The rules have conditions this calculator does not model — ask a tax professional before counting on it.
What if I plan to refinance in a few years?
Then points are usually a poor bet. The whole return comes from holding the loan past the break-even, and a refinance ends the loan early. If there is a realistic chance you refinance inside 5 years 1 month, keep the cash.

How we calculate this

One point = 1% of the loan amount. Both payments come from the same amortization engine behind the mortgage calculator. The simple break-even is the points cost divided by the monthly saving; the true crossover walks both loans month by month and finds where total outlay — payments made, plus the points, plus the balance still owed — first favours the buydown.

The rate reduction is your input, because no fixed points-to-rate ratio exists. We do not assume an investment return on the cash spent, and we do not model the tax treatment of points, which has conditions worth asking a professional about.

Full methodology & sources →
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Estimates on a 30-year fixed loan, principal and interest only. Your loan estimate is the authority on what points cost and what they buy. Not financial advice.