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Mortgage Points Break-Even Calculator
Discount points buy down your rate — typically 1 point (1% of loan) cuts rate 0.25%. Break-even depends on hold period and tax deductibility. This calculator runs the comparison.
Break-even (months)
45.9
Monthly payment savings
$94
Net savings over hold period
$3,604
Cost of points (pre-tax)
$5,700
Cost after tax deduction
$4,332
Reduced rate
6.500%
How the math works
$380K at 6.875% base, buying 1.5 points for $5,700 cuts rate to 6.5%. Monthly savings ~$86. Break-even ~50 months after tax benefit.
Hold 7+ years? Strong buy. Hold 4 years? Skip — you won't recover the upfront cost. Also consider: would the $5,700 cash be better elsewhere (down payment to avoid PMI, investment, emergency fund)?
How to Use
- Enter loan amount, base rate, points, rate reduction per point.
- Enter expected hold years and marginal tax rate.
- See break-even months, net savings over hold, and ROI.
Frequently Asked Questions
Are points deductible?
On a purchase: yes in year paid (primary home). On refi: amortized over loan life. Schedule A itemizers benefit; standard-deduction filers see no tax benefit.
Typical rate reduction per point?
0.125-0.25% per point in 2026. Varies by lender and market. Confirm before buying — some lenders offer 0.375% reduction but charge 1.5 points.
When are points worth it?
Long hold (7+ years) and confident you won't refi. Break-even typically 48-72 months. Hold under 4 years: almost never worth it.
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