Buying points is a bet that you will keep the loan long enough to earn the up-front cost back. This calculator gives you the breakeven month and your true net position at the horizon you actually expect — including the extra principal a lower rate pays down.
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One point costs 1% of the loan amount — $4,000 on a $400,000 loan — paid at closing. It typically buys about 0.25 percentage points off the rate, though the exchange varies daily and by lender, so always confirm the actual reduction being offered.
Only if you keep the loan past the breakeven point, usually five to seven years. The median US homeowner sells or refinances well before that, which is why points lose money for most borrowers despite looking attractive on a lifetime-savings basis.
Divide the up-front cost by the monthly payment savings. Points costing $8,000 that save $130 a month break even in 62 months. Anything past that month is profit; selling or refinancing before it means the money is simply lost.
Discount points on a primary-residence purchase are generally deductible in the year paid if you itemize, while points on a refinance must usually be amortized over the loan term. Rules are specific — confirm with a tax professional for your situation.
Discount points buy down your interest rate and are optional. Origination points are a lender fee for processing the loan and buy you nothing. Only discount points belong in a breakeven calculation.
Sources: CFPB — Understanding discount points; IRS Publication 936 — Home Mortgage Interest Deduction; Standard amortization (annuity) formula.
Estimates for educational purposes only — not a loan offer, financial advice, or a commitment to lend. Actual rates, payments, and terms vary by lender and creditworthiness.