Are points worth buying?

Only if you keep the loan past the break-even, typically around five years. Most mortgages do not last that long because people move or refinance.

What is a point worth?

Usually a quarter point of rate for one percent of the loan, though it varies. A lender offering less than that is worth pushing back on.

Finance & LoansmortgageUnited States only

Mortgage Points & Buydown Calculator

Whether buying mortgage points pays. A point costs one percent of the loan and typically buys a quarter point of rate, so break-even usually falls between four and seven years, which is longer than most people keep a mortgage.

Also called: discount points calculator, buying down the rate.

Break-even

60.5

60.5 months to break even on 1 points costing $3,800.00. The rate drops to 6.5%, saving $62.81 a month. Over 7 years you save $1,476.40, so buying points pays over the period you expect to hold the loan.

Cost of the points

$3,800.00

Rate with points

6.5%

Monthly saving

$62.81

Payment without points

$2,464.67

Payment with points

$2,401.86

Net saving over your horizon

$1,476.40

Verdict

pays over the period you expect to hold the loan.

How this is calculated

Method and background

This is what the calculation gives for the numbers you entered. It is an estimate, not advice, and it knows nothing about your situation beyond those numbers. Rules for United States change on a published schedule; the effective date is shown on every rule-based tool.

How this is calculated

A point is one percent of the loan paid upfront to lower the rate. The break-even is simply the cost divided by the monthly saving, and it usually lands around five years. The reason points often lose is that the median mortgage does not survive that long: people move, or rates fall and they refinance, and the prepaid interest is gone. Points make sense when you are confident about staying and when the rate reduction offered is better than the typical quarter point.

points are prepaid interest, so the question is only whether you stay long enough to recover them

p: Points

Worked examples

Each of these is asserted on every build. If a change to the engine ever moved one of these answers, the build would fail before the page could print it.

one point on a 380,000 loan

Loan amount: $380,000.00
Rate without points: 6.75%
Points purchased: 1
Rate reduction per point: 0.25%
Term: 30
Years before selling or refinancing: 7

Break-even60.5

1% of 380,000; 6.75 less 0.25

Open this example

no points means no cost and no saving

Loan amount: $380,000.00
Rate without points: 6.75%
Points purchased: 0
Rate reduction per point: 0.25%
Term: 30
Years before selling or refinancing: 7

Break-even0

boundary

Open this example

Method and limits

What it assumes

A fixed rate loan held to the stated horizon.

What it deliberately does not model

Points may be tax deductible, which shortens the break-even for itemisers.
The rate reduction per point varies by lender and by market conditions.
Refinancing or selling before break-even wastes the entire cost.

Formula version 1.0.0 · definition 1.0.0 · United States · Report a problem with this calculator

Frequently asked questions

Are points worth buying?: Only if you keep the loan past the break-even, typically around five years. Most mortgages do not last that long because people move or refinance.
What is a point worth?: Usually a quarter point of rate for one percent of the loan, though it varies. A lender offering less than that is worth pushing back on.