Mortgage Points Break-Even Calculator
Find out exactly when paying discount points upfront starts saving you money — and whether it makes sense for your timeline.
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What Are Mortgage Discount Points?
One discount point costs 1% of your loan amount and typically lowers your rate by 0.25% — though this varies by lender. On a $350,000 loan, one point costs $3,500 and saves about $50/month at current rates.
Points make sense if you stay in the home past the break-even date. If you’ll sell or refinance before then, you’re better off keeping the cash.
Mortgage Points: Real Break-Even Examples
Example 1: $350,000 Loan — 1 Point to Drop Rate from 7.25% to 7.0%
Paying 1 point ($3,500) on a $350,000 loan to reduce the rate from 7.25% to 7.0% lowers your monthly payment from $2,389 to $2,329 — a savings of $60/month. Break-even: $3,500 ÷ $60 = 58 months (4 years 10 months). If you plan to stay in the home longer than 5 years, the point pays off. If you might sell or refinance within 4 years, skip the points.
Example 2: 2 Points for a Larger Rate Reduction
Buying 2 points ($7,000) on a $350,000 loan to drop from 7.5% to 7.0% saves $116/month. Break-even: $7,000 ÷ $116 = 60 months (exactly 5 years). After break-even, you are saving $116/month every month you stay. Over a 30-year stay that’s $34,800 in savings beyond the $7,000 cost — a strong return if you are confident you will stay long-term.
Example 3: High-Cost Market — $700,000 Loan, Points Decision
On a $700,000 loan at 7.5%, one point costs $7,000 and might drop the rate to 7.25%, saving $114/month. Break-even: $7,000 ÷ $114 = 61 months. In expensive markets where buyers frequently refinance when rates drop, points often do not make sense — you may refinance before reaching break-even. Points are most valuable when rates are high and you expect to hold the mortgage for many years without refinancing.
Example 4: The Opportunity Cost of Points Money
Before buying points, consider the alternative: investing that $3,500 instead. At 7% annual return, $3,500 grows to $6,875 in 10 years. If points save you $60/month for 10 years that is $7,200 — slightly ahead of investing. At 15 years the gap widens: $60/month in mortgage savings = $10,800, invested $3,500 = $9,660. Points win if you stay and do not refinance, but the margin is not always as wide as it appears.