Points vs Closing Costs Calculator

Decide whether to pay discount points (extra closing costs) for a lower rate, or take the par rate and keep the cash. The answer depends on how long you'll hold the loan.

Loan amount

Term (years)

Hold years

Par (no-points) rate

Points purchased

Rate reduction

Net benefit at hold

$5,000

points pay back

Break-even months

Points cost

$8,400

Monthly savings

$140

$2,794 → $2,655

Reading the number

Hold horizon clears the break-even. Points pay back during your expected ownership.

Discount points are most valuable when you're confident you'll keep the loan past break-even (typically 4–6 years). If you might refinance soon or sell within a few years, take the par rate.

How to Use

Enter loan amount, term, and the years you actually expect to keep the loan.
Enter the par (no-points) rate.
Enter the points you'd buy and the rate reduction they buy (typically 0.25% per 1 point).
Read break-even months and the net benefit at your hold horizon.
Buy points if hold > break-even comfortably. Take par rate if you might refinance or move soon.

Frequently Asked Questions

Are points the same as origination fees?

No. Origination fees are what the lender charges to make the loan (Section A). Discount points are an optional add-on you pay to lower the rate. Origination is required; points are voluntary.

How much rate reduction do points buy?

Roughly 0.25% per 1 point on most conforming loans. Some lenders offer better or worse — get specific quotes. Jumbos and government loans (FHA/VA) often have different ratios.

When do points beat keeping the cash?

When your hold period clears break-even (usually 4–6 years) and the cash isn't more valuable elsewhere. If you'd invest the saved cash at a higher return, points may not win even past break-even.

Are points tax-deductible?

On a primary residence purchase, yes — generally fully deductible in the year paid. On refinances, points are usually deducted ratably over the loan term. Confirm with a CPA for your specific situation.