Mortgage Points Calculator
How long buying down your rate takes to pay off
- Cost of points1 point = 1% of the loan
- $3,600
- New rate
- 6.75%
- Monthly savingsprincipal and interest
- $60.14
- Break-evencost ÷ monthly savings
- 5 yr
- If you keep the loan 7 yearspayments saved + lower balance − cost
- ✓ Comes out ahead$2,747
- If you keep it the full term
- $18,049
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Estimate, not a loan offer. How much a point lowers your rate depends on the lender and the market. We may earn a commission when you click. It does not change your estimate. How we calculate · How we make money
| Temporary buydown | Year 1 | Year 2 | Year 3 | After that | Upfront cost |
|---|---|---|---|---|---|
| 1-0 buydown | $2,158.38 | — | — | $2,395.09 | $2,840 |
| 2-1 buydown | $1,932.56 | $2,158.38 | — | $2,395.09 | $8,391 |
| 3-2-1 buydown | $1,718.70 | $1,932.56 | $2,158.38 | $2,395.09 | $16,508 |
Ask for quotes with and without points
Lenders price points differently. Ask each one for the rate with no points and with one point, then compare break-even times.
Free to compare. No obligation.
How mortgage points work
Discount points are prepaid interest: you pay the lender upfront, and in return you get a lower rate for the life of the loan. One point costs 1% of the loan amount. The question is whether the monthly savings add up to more than the cost before you sell or refinance.
Break-even (months) = cost of points ÷ monthly savings
With the example numbers, one point on a $360,000 loan costs $3,600 and lowers the rate from 7% to 6.75%. That saves about $60 a month, so it takes about 5 years to break even. Keep the loan 7 years and you come out about $2,750 ahead, counting the lower balance as well as the lower payments.
Temporary buydowns: 2-1, 3-2-1 and 1-0
A temporary buydown lowers your payment for the first one to three years only, then the payment returns to the full rate. The table shows each type's payments and upfront cost for your loan. Sellers and builders often pay for them as a sales incentive, and lenders generally qualify you at the full rate, so make sure you can afford the payment after the buydown ends.
When points make sense
- You expect to keep the loan well past the break-even point.
- You have cash to spare after your down payment, closing costs and reserves.
- You don't expect to refinance soon. If rates fall and you refinance, the points you paid stop paying you back.
Frequently asked questions
What are mortgage points?
Discount points are an upfront fee you pay the lender for a lower interest rate. One point costs 1% of the loan amount. How much each point lowers the rate varies by lender and market; a quarter of a percentage point per point is a common rough figure.
Is it worth buying points?
It depends on how long you keep the loan. Divide the cost by the monthly savings to get the break-even point. With the example numbers, one point on a $360,000 loan costs $3,600, saves about $60 a month and breaks even in about 5 years. If you might sell or refinance sooner, points usually don't pay off.
What is a 2-1 buydown?
A temporary buydown lowers your payment for the first years only: in a 2-1, the rate is 2 points lower in year 1 and 1 point lower in year 2, then returns to the full rate. The savings are paid upfront, often by the seller or builder. Lenders generally qualify you at the full rate, so plan for the full payment from year 3.
Are mortgage points tax deductible?
Points paid on a loan to buy your main home can often be deducted, either in the year you pay them or over the life of the loan, if you itemize. Rules differ for refinances. Check IRS Publication 936 or ask a tax professional.