Mortgage Points & Break-Even Calculator
Calculate upfront cash cost for discount mortgage points, monthly payment savings, reduced interest rate, and exact break-even payoff months.
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Frequently Asked Questions
What are mortgage discount points?
Mortgage discount points are fees paid directly to the lender at closing in exchange for a permanently reduced interest rate on your mortgage. 1 discount point equals exactly 1.0% of your loan amount (e.g., $4,000 on a $400,000 loan).
How much does 1 discount point lower my mortgage rate?
Typically, 1 point lowers your fixed mortgage interest rate by 0.25% (25 basis points). For example, purchasing 1 point on a 6.75% mortgage lowers the rate to 6.50%.
How is the break-even period calculated?
The break-even point is calculated by dividing your total upfront cash cost for points by the monthly payment savings. If you pay $4,000 upfront and save $80 each month, your break-even is 50 months (4.16 years).
When is buying mortgage points a bad financial move?
Buying discount points is not recommended if you plan to sell the home, move, or refinance the mortgage before reaching your break-even month, as you will forfeit the upfront cash without recouping the savings.