Mortgage Discount Points Calculator
See whether buying down your rate pays for itself.
What this calculator helps you estimate
This calculator compares two quoted pricing options — a rate with points and a rate without — and shows the monthly savings, the break-even month, and the net result over the period you expect to keep the loan.
Discount points are prepaid interest: you pay cash at closing in exchange for a lower note rate. Whether that trade is worthwhile depends almost entirely on how long the loan survives.
Inputs
Compare two pricing options
How long before you expect to sell or refinance
The rate improvement a given number of points buys is set by daily market pricing and your loan profile. Enter the two rate options actually quoted to you.
Results
Break-even analysis
Interpretation
You would recover the $4,000.00 cost of points after about 40 months of payment savings. Staying in the loan longer than that generally favors paying points; leaving sooner generally does not.
Points are only worthwhile if the loan lasts long enough. Selling, refinancing, or paying the loan off early ends the savings while the upfront cost stays spent. The same cash may also serve other goals, such as a larger down payment or stronger reserves.
Understand the math
How this calculator works
Discount points are prepaid interest — cash paid at closing in exchange for a lower note rate. Whether that trade pays off depends almost entirely on how long you keep the loan, which is exactly what this calculator measures.
Worked example
$400,000 loan, choice between 6.75% with no points or 6.25% with one point ($4,000).
- Payment at 6.75% ≈ $2,594.39/month
- Payment at 6.25% ≈ $2,462.87/month
- Monthly savings = $2,594.39 − $2,462.87 = $131.52
- Break-even = $4,000 ÷ $131.52 ≈ 30.4 months
Break-even in about 30 months (roughly 2.5 years) of keeping the loan.
How to read your results
Interpretation guidance
- If you expect to keep the loan well beyond the break-even month, paying points can be a sound long-term trade.
- If you might sell or refinance within a few years, points frequently cost more than they save.
- One point equals 1% of the loan amount — larger loans mean larger dollar costs for the same rate improvement.
- Ask whether a seller or lender credit could cover part of the points, which shifts the break-even dramatically in your favor.
Deeper answers
More questions about this calculator
What is a mortgage discount point?
One discount point equals 1% of the loan amount, paid at closing in exchange for a lower interest rate. On a $400,000 loan, one point costs $4,000.
How much does one point lower my rate?
There is no fixed amount — the rate improvement per point is set by daily market pricing and your loan profile. Ask for the specific rate options quoted to you and enter both here.
What is the break-even point on discount points?
The cost of the points divided by the monthly payment savings. If points cost $4,000 and save $90 per month, break-even is roughly 44 months.
Are discount points tax deductible?
Points may be deductible in some circumstances, and treatment differs between a purchase and a refinance. This is a tax question — consult a qualified tax advisor about your situation.
Results are estimates for educational purposes only and are not a commitment to lend, loan approval, or official Loan Estimate. Actual rates, payments, costs, taxes, insurance, mortgage insurance, eligibility, and loan terms may vary.
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Answers
Frequently asked questions
What is a mortgage discount point?
One discount point equals 1% of the loan amount, paid at closing in exchange for a lower interest rate. On a $400,000 loan, one point costs $4,000. Results are estimates for educational purposes only and are not a commitment to lend.
How much does one point lower my rate?
There is no fixed amount. The rate improvement per point is set by daily market pricing and by your loan profile — credit, loan-to-value, occupancy, and property type. Ask for the specific rate options quoted to you and enter both here.
When do points make sense?
Generally when you expect to keep the loan well past the break-even month, you have cash beyond your down payment and reserves, and you do not expect to refinance soon. If any of those are uncertain, points carry more risk.
What is the break-even point on discount points?
The cost of the points divided by the monthly payment savings. If points cost $4,000 and save $90 per month, break-even is roughly 45 months.
Can the seller or lender pay for points?
Seller or lender credits can sometimes be applied toward points, subject to program limits on interested-party contributions. When someone else pays, the break-even math changes substantially in your favor.
Are discount points tax deductible?
Points may be deductible in some circumstances, and the treatment differs between a purchase and a refinance. This is a tax question, not a lending question — consult a qualified tax advisor about your situation.
Next step
Numbers are helpful. A personalized strategy is better.
Review your scenario with a Vabasso mortgage expert. No pressure, no obligation — just clear guidance for your next move.