Mortgage Points Calculator

How to Use the Mortgage Points Calculator

This calculator answers one question: how many months it takes for the lower payment from buying points to pay back what the points cost at closing. You need four numbers, all of which are on your Loan Estimate.

• Loan amount: the amount you are borrowing, not the purchase price.
• Points you are buying: one point equals 1% of the loan amount. Fractions work too, such as 0.5 or 0.25.
• Monthly payment without points and with points: use the principal and interest payment for each option. Leave out taxes and insurance, since buying points does not change them.
• How long you plan to keep the loan: how long until you expect to sell or refinance, not the loan term. A 30-year loan you expect to refinance in five years should be entered as 5.

How the Break-Even Is Calculated

The math is simple, and it is worth knowing so you can check any quote yourself.

• Cost of points = loan amount × number of points × 1%
• Monthly savings = payment without points − payment with points
• Break-even (months) = cost of points ÷ monthly savings
• Net savings over your stay = monthly savings × months you keep the loan − cost of points

Hypothetical example: on a $400,000 loan, one point costs $4,000. If it lowers the payment by $75 a month, the break-even is about 53 months. If you keep the loan for seven years (84 months), you save $6,300 in payments, which is $2,300 more than the $4,000 you paid. If you sell after three years, you are $1,300 behind.

What the Result Does Not Include

The break-even is the right starting point, but it is not the whole picture.

• What else the cash could do. Money spent on points could go toward a larger down payment, reserves, or closing costs instead.
• Taxes. Points may be deductible if you itemize, which can shorten the real break-even. Ask a tax professional.
• A future refinance. If rates drop and you refinance, the points on this loan are gone, whatever the calculator says.

For the full explanation of how points work, how many you can buy, and when they make sense, read our guide to mortgage points.

Frequently Asked Questions

How do you calculate the break-even on mortgage points?

Divide the cost of the points by the monthly payment savings. For example, $4,000 in points that saves $75 a month breaks even in about 53 months. After that, the lower payment is real savings for as long as you keep the loan.

What is a good break-even period for mortgage points?

There is no single right number, but many borrowers look for a break-even of about five years or less, and well inside the time they realistically expect to keep the loan. The shorter the break-even compared with your plans, the stronger the case for buying points.

Where do I find my payment with and without points?

Ask your lender for two Loan Estimates, or a pricing comparison, for the same loan with and without points. Use the principal and interest payment from each one. Rates change daily, so compare quotes from the same day.

Can I use this calculator for lender credits?

Not directly, but the same math works in reverse. Divide the lender credit by how much more you pay each month for taking it. The result is how many months until the higher payment has cost you more than the credit was worth. If you expect to sell or refinance before then, the credit is usually the better deal.

Examples are hypothetical and for illustration only. They are not a rate quote, a loan offer, or tax advice. Actual pricing depends on your credit profile, loan amount, program, and market conditions at the time you lock.