Mortgage Points Calculator

How mortgage discount points lower your rate and monthly payment

Discount points are prepaid interest that you pay at closing for a lower rate. In its points guide, the Consumer Financial Protection Bureau (CFPB) notes that 1 point equals 1% of the loan. Points do not have to be round numbers: on a $100,000.00 loan, you can pay 1.375 points ($1,375.00), 0.5 points ($500.00), or 0.125 points ($125.00). Under 12 CFR 1026.37(f)(1)(i), points appear on page 2, Section A of your Loan Estimate and must lower your rate.

Comment 17(c)(3)-1 to 12 CFR 1026.17 allows for payments collected in whole cents and for a last payment that absorbs the rounding. This calculator rounds each payment and each month's interest half-up to the cent, its own convention, and sets the last payment to reach $0.00. On a $300,000.00 30-year loan at 6.5%, the payment is $1,896.20 (last payment $1,900.91) and total interest is $382,636.71. Buying 1 point lowers the rate to 6.25% and drops the payment to $1,847.15 (last payment $1,848.95). Full-term interest falls to $364,975.80, saving $17,660.91 in interest ($14,660.91 net after points). Check your base payment in the mortgage payment calculator or view each month in the loan amortization calculator.

Whether points pay off depends on how long you keep the loan before you sell or refinance. The monthly saving alone repays the cost of the points in 61.2 months. The lower rate also pays your balance down faster, so you owe less when you sell. Counting both, the points are paid back at month 48. At 3 years (36 months) the lower payment has saved $1,765.80 and you owe $490.90 less, which leaves you $743.30 behind. At 5 years it is $2,943.00 and $821.43, which leaves you $764.43 ahead. At 10 years it is $5,886.00 and $1,615.71, a net gain of $4,501.71. Test a future rate drop in the mortgage refinance calculator or check extra payments in the mortgage payoff calculator.

The discount points payment, break-even, and APR formulas

cost of points   = round_cents(loan × points ÷ 100)        amount financed = loan − cost of points
rate with points = rate − points × reduction per point   (or the quoted rate)
M(r)             = round_cents(P × i × (1 + i)^n ÷ ((1 + i)^n − 1)),   i = r ÷ 12,   n = years × 12
monthly savings  = M(rate) − M(rate with points)        break-even on payments alone = cost of points ÷ monthly savings
net result       = payments saved over months kept + (balance without points − balance with points after months kept) − cost of points
break-even month = the first month in which the net result is 0 or more
amount financed  = Σ_{k=1..n−1} M_pts ÷ (1 + APR ÷ 12)^k + M_pts,final ÷ (1 + APR ÷ 12)^n

Worked mortgage points examples

Example 1 — Buying 2 points on a $400,000.00 30-year mortgage at 7%. Without points, a $400,000.00 loan at 7% has a payment of $2,661.21 (last payment $2,661.52) and $558,035.91 in total interest. Paying 2 points costs $8,000.00 at closing. At 0.25% per point, the rate drops to 6.5% and the payment falls to $2,528.27 (last payment $2,530.88). Total interest drops to $510,179.81. The $132.94 monthly saving repays the points in 60.2 months on payments alone. Once the lower balance counts, they are repaid by month 48 (6.695% APR on the points alone). Selling after 5 years leaves you $2,058.73 ahead: $7,976.40 in lower payments and $2,082.33 less owed, less the $8,000.00. Staying 10 years saves $15,952.80 in payments, leaves you owing $4,144.66 less, and nets $12,097.46 after points. Compare 15-year and 30-year terms in the mortgage term comparison calculator.

Example 2 — CFPB sample Loan Estimate H-24(C) ($211,000.00 loan with 1 point) and a 15-year loan. On page 2, Section A of CFPB sample H-24(C) for a $211,000.00 loan on a $240,000.00 home, Ficus Bank lists "1 % of Loan Amount (Points) $2,110" for a 4% rate. It also lists a $500.00 application fee and a $500.00 processing fee ($3,110.00 total in Section A). On a 30-year fixed loan of $211,000.00 where 1 point ($2,110.00) cuts the rate from 4.25% to 4%, the payment drops from $1,037.99 to $1,007.35. That saves $30.64 a month and repays the points in 68.9 months on payments alone (month 49 counting the lower balance). Over 10 years it nets $2,958.88. On a 15-year $300,000.00 loan at 6% where 1 point cuts the rate to 5.75%, the payment drops from $2,531.57 to $2,491.23 ($40.34 a month). Payments alone take 74.4 months (month 51 counting the lower balance), and a sale after 7 years nets $1,690.82.

Scope, rounding, and APR conventions

• Fixed-rate principal and interest: Both loans use fixed rates and equal monthly compounding (r = annual rate ÷ 12). Property taxes, homeowners insurance, HOA dues, and mortgage insurance are excluded because discount points do not change those bills. The points are paid in cash at closing; financing them would raise the balance and the payment, and that case is not modeled here.
• Whole-cent monthly rounding and APR: Each payment and monthly interest charge is rounded half-up to the cent, this calculator's own convention. The last payment is adjusted to bring the balance to $0.00. Under 12 CFR 1026.22(a)(1), the APR is determined by the actuarial method of Appendix J. The APR with points here is solved that way on the net amount financed (loan minus points cost) over the full term. It counts no other finance charge.
• Lender pricing and holding period: The default 0.25% rate drop per point is an example starting value. Each lender sets its own pricing by loan type, credit score, and market rates. Switch Rate Reduction to "Rate quoted with the points" when you have a lender quote.
• Cash break-even: Add the payments saved so far to the balance you no longer owe because the lower rate pays down faster, then subtract the cost of points. The break-even month is the first month that total reaches 0. It assumes you sell or refinance and pay the balance off at that month. The break-even on payments alone, cost of points divided by the monthly saving, is shown separately. Neither counts outside investment returns, income tax deductions, or the costs of a new loan.

These figures are estimates for learning and planning, not financial, tax, legal or investment advice. Terms of use.

What to check on your Loan Estimate before buying points

Match the break-even month against your real stay in the home, not the 30-year loan term. In its points guide, the CFPB suggests asking your loan officer to compare total costs over your shortest, longest, and most likely stay. At the default month-48 break-even, selling at month 36 leaves $743.30 of your point unrecovered.

Ask every lender to quote the same number of points, starting at 0 points. If one lender quotes 6.25% with 0.75 points ($2,250.00 on the default loan) and a second quotes 6.25% with 0 points, the second saves $2,250.00 at closing. Compare all page-2 fees in the closing costs calculator.

Check page 1 and page 2 of your Loan Estimate and Closing Disclosure 3 business days before closing. Confirm that your rate lock is active on page 1 and that Section A on page 2 lists the exact points and rate you chose.

Weigh buying points against making extra principal payments if you want cash flexibility. Paying $3,000.00 for 1 point locks that cash into closing costs. Keeping the zero-point rate and adding $50.00 a month to principal lets you stop anytime; test it in the mortgage payoff calculator.

Questions on mortgage discount points and lender credits