What should I enter for how long I will keep the loan?

Enter how many years you expect to keep this mortgage before selling, refinancing, or paying it off. The calculator converts this horizon to months, caps it at the term, and uses it to show net savings or cost over the period that matters to you.

Mortgage Points vs Rate Break-Even •

Q: What are mortgage discount points?

Discount points are optional upfront fees paid at closing to reduce your mortgage rate. One point usually costs 1% of the loan amount and may lower the APR, but the exact trade-off depends on your lender and market conditions.

Q: How does this calculator decide the break-even month?

The calculator compares your monthly savings from the lower buy-down rate to the upfront cost of points. Break-even is the first month when cumulative savings are estimated to exceed the points cost, capped at the full loan term.

Q: Are mortgage points always a good deal if break-even is early?

Not always. Even with a short break-even period, you still need enough cash at closing, a solid emergency fund, and other priorities covered. Compare points against paying down higher-interest debt, increasing savings, or borrowing less overall.

Q: Are mortgage points tax-deductible?

Tax treatment of points varies by country, local rules, and personal circumstances. Some borrowers can deduct points immediately, others amortize them, and some get no tax benefit. Always confirm with a qualified tax professional.

Compare mortgage discount points vs base rate in USD

Step 1 · Loan amount and rates

Loan amount (USD) Principal you borrow at closing in USD. Base APR (without points) Annual percentage rate if you do not buy points. Buy-down APR (with points) Lower APR offered if you pay discount points upfront.

Step 2 · Points cost and how long you’ll keep the loan

Points cost (% of loan) 1 point = 1% of the loan amount. Enter 0 if you are not paying points. Term (years) Length of the mortgage used for payment calculations. How long you’ll keep the loan (years) We cap this at the term. Leave blank to assume full term.

Mortgage points vs rate summary

Enter your loan details and tap “Calculate” · USD

We’ll compare a base mortgage rate against a lower buy-down rate, calculate monthly payment savings, estimate your break-even month on upfront discount points, and show net savings or cost over the years you expect to keep the loan. All figures are in USD and assume a fixed-rate mortgage with level payments.

Assumptions: Fixed-rate mortgage in USD with monthly payments. Monthly rate r = APR/12 (APR as a decimal), term payments n = 12 × years. Base and buy-down payments both use the standard amortization formula with the same principal and term. Points cost is entered as a percent of the loan (loan × points%). Monthly savings = base payment − buy-down payment (never below zero). Break-even months are approximated as ⌈points cost ÷ monthly savings⌉ when savings > 0, capped at the full term. Net savings over your keep period = monthly savings × months kept − points cost. Taxes, escrow changes, lender fees, and tax treatment of points are not included.

Updated: October 10, 2025

Mortgage points vs rate FAQs

What are mortgage discount points?

Discount points are optional upfront fees you pay at closing to lower your mortgage rate. One point usually costs 1% of the loan amount and may reduce the APR by about 0.25 percentage points, though the exact trade-off depends on your lender and the day’s pricing.

How does this calculator decide the break-even month?

The tool compares your monthly savings from the lower rate to the upfront cost of points. Break-even is the first month when cumulative savings are estimated to exceed the points cost, capped at the full loan term. If monthly savings are zero or negative, there is no break-even.

What should I enter for “How long you’ll keep the loan”?

Use your best guess for how many years you will keep this mortgage before you sell, refinance, or pay it off. The calculator caps this horizon at the term and uses it to show your net savings (or cost) over the period that actually matters to you.

Are mortgage points always a good deal if break-even is early?

Not necessarily. A short break-even period is attractive, but you still need enough cash at closing and an adequate emergency fund. Compare points against other priorities such as paying down higher-interest debt, boosting savings, or reducing overall loan amount.

Are mortgage points tax-deductible?

Tax treatment of points depends on your country, local rules, and personal situation. Some borrowers can deduct points immediately, others amortize them, and some get no tax benefit at all. Always confirm with a qualified tax professional instead of relying solely on estimates from a calculator.

How to use this mortgage points vs rate break-even calculator

1. Enter your loan amount and both rates

Start with the basics: your loan amount in USD and the two APRs your lender is quoting. The base APR is what you would pay with no discount points. The buy-down APR is the lower rate if you pay points upfront. The calculator keeps the same loan amount and term for both scenarios so you are comparing apples to apples.

2. Add the points cost and mortgage term

In the points field, enter the percentage of the loan you would pay as points. One point is 1% of the principal; for example, 1 point on a 400,000 USD loan is 4,000 USD. Next, enter your term in years, such as 15, 20, or 30. The tool converts that term into monthly payments and applies the standard amortization formula to both rates.

3. Choose a realistic keep period

Most borrowers do not keep the same mortgage for the full term. In the “How long you’ll keep the loan” field, enter how many years you expect to keep this mortgage before you move, refinance, or make a major change. If you are unsure, you can start with a rough guess like 5–7 years and then try a few alternatives to see how the break-even point shifts.

4. Read the monthly savings, break-even month, and net result

After you hit Calculate, the left side of the summary shows the monthly payment with and without points and your monthly savings. The right side highlights your estimated break-even month, how many months you plan to keep the loan, and the net savings (or cost) over that keep period. If the net figure is negative, the points are likely not worth it for your assumed horizon.

5. Use the summary to compare offers and priorities

Because the calculator reports everything in USD with clear monthly and total figures, you can use the Copy summary button to paste the breakdown into a note, spreadsheet, or email. Compare several rate–points combinations, think about your cash on hand, and weigh the trade-off between upfront cost and lower ongoing payments. Always review your lender’s official loan estimate and talk with a professional advisor before making final decisions.

How the mortgage points vs rate break-even math is approximated

Let P be the loan amount in USD, a the annual percentage rate as a decimal (for example, 0.06875 for 6.875%), and Y the term in years. The number of monthly payments is n = 12Y. The monthly rate is r = a / 12. For each rate, the fixed monthly principal-and-interest payment is:

PMT = P × r / (1 − (1 + r)⁻ⁿ) for r > 0, and PMT = P / n if r = 0.

The calculator computes PMT_base using your base APR and PMT_buy using your buy-down APR. The points cost is P × points%, where points% is the percentage you enter (for example, 0.01 for 1%). Monthly savings are:

Savings per month = PMT_base − PMT_buy, floored at zero if the buy-down payment is not actually lower.

When savings are positive, the break-even month is approximated as the smallest integer month where cumulative savings exceed the cost of points: break-even ≈ ⌈points cost ÷ monthly savings⌉, capped at the total number of payments n. For your chosen keep period, the tool converts years to months, caps at n, and computes:

Net savings over keep period = (monthly savings × kept months) − points cost.

All outputs are rounded to two decimal places and are intended as planning estimates. The model does not include taxes, escrow items, lender credits, or other fees, and it assumes the rate and term stay fixed. Always rely on official loan disclosures and professional advice for final decisions.