What does Mortgage Points Calculator do?
Mortgage points calculator: compare the cost of discount points with the monthly saving and find your break-even month and net saving over time.
- Price
- Free
- Account
- Not required
- Processing
- Entirely in your browser; your data and files are not uploaded
- Works on
- Any modern browser on desktop, tablet or phone
- Region
- United States (USD)
- Category
- Financial Calculators
How to use the mortgage points calculator
- Enter the loan amount and term.
- Enter the rate with no points and the rate with points, plus the number of points, from the same lender.
- Enter how many years you expect to keep the loan before selling or refinancing.
- Read the break-even month and the net saving over that time.
Worked example
$400,000 for 30 years: 6.75% with no points or 6.5% with 1 point
One point costs 1% of the loan: $4,000. The payment falls from $2,594.39 to $2,528.27, a saving of $66.12 a month, so the points are repaid by payment savings after 61 months. Over 10 years you save $7,934.40 in payments and owe $2,099.42 less, for a net saving of $6,033.82 after the $4,000 cost. Counting the lower balance too, you break even after 48 months.
How it works
Cost of points = points × 1% of the loan amount. Both loans are amortized with M = P × r / (1 − (1 + r)−n). Simple break-even = cost ÷ monthly saving, rounded up. The full comparison adds the difference in remaining balance: net saving after k months = (payments + balance on the no-points loan) − (payments + balance on the points loan + cost of points). The full break-even is the first month where that is zero or more.
Assumptions
- One point equals 1% of the loan amount, as the CFPB explains. How much a point lowers the rate depends on the lender; enter both quotes.
- Points are paid in cash at closing, not financed.
- No investment return on the cash and no tax effects are modelled.
Frequently asked questions
What is a discount point?
An upfront fee paid to the lender to lower your interest rate. One point is 1% of the loan amount, so one point on $400,000 is $4,000.
When are points worth it?
When you keep the loan longer than the break-even period. If you might sell or refinance sooner, the higher rate with no points usually costs less.
Why are there two break-even figures?
The simple one counts only the lower payment. The full one also counts the faster paydown at a lower rate, which leaves you owing less, so it is usually sooner.
Are points the same as lender credits?
They work in opposite directions. Points raise your upfront cost to lower the rate; lender credits lower your upfront cost in exchange for a higher rate.
Limitations
- Uses the rates you enter; it does not know what lenders charge per point.
- Principal and interest only.