How It Works
A mortgage point is generally priced as a percentage of the loan amount. This calculator compares the monthly principal-and-interest payment at the current rate with a hypothetical lower rate after purchasing the points.
The break-even month is the upfront points cost divided by the monthly payment savings. Taxes, refinancing, prepayment, and changing rates are not modeled.
Formula
- P — Loan principal
- cost — Loan amount × points ÷ 100
- savings — Payment at current rate − payment at reduced rate
Example
Example inputs: Loan $280,000, 6.5% rate, 1 point, 0.25% reduction, 30 years.
Result: Estimated points cost: $2,800. Monthly savings: about $47. Break-even: about 60 months.
Frequently Asked Questions
Does one point always lower the rate by 0.25%?
No. The rate reduction associated with a point varies by lender, loan, market conditions, and borrower.
What does break-even mean?
It is the approximate time required for cumulative monthly payment savings to equal the upfront cost of the points.
Are points always worth buying?
Not necessarily. The value depends on the upfront cost, monthly savings, how long you keep the loan, and whether you refinance or pay off the mortgage before the break-even point.
This calculator provides estimates for informational purposes only and should not be considered financial, tax, or legal advice.