Lender Point Calculator
When you buy lender points, also called discount points or mortgage points, you pay cash at closing to lower your interest rate: one point costs 1% of the loan amount. This lender point calculator works out what the points cost, how much the monthly payment drops, when the savings repay the upfront fee, and what you actually gain or lose if you sell or refinance early, using the real remaining balance at that date rather than payment savings alone. Enter your lender’s actual rate reduction per point when you have it; the common 0.25% rule of thumb is only the default.
Points are assumed to be paid in cash at closing, not financed into the loan.
Break-even point
62 months
Quick Answer
On a $300,000 loan over 30 years at 6.5%, buying 2 points costs $6,000 at closing and, at the standard 0.25% reduction per point, cuts the rate to 6.00% and the payment from $1,896.20 to $1,798.65, a saving of $97.55 a month. The simple break-even is 62 months, and keeping the loan the full term saves $29,118.90 net of the points. The calculator above is pre-filled with this exact loan.
Key takeaways
- One point always costs 1% of the loan amount. What it buys you in rate reduction is negotiable and varies by lender, which is why the reduction is an input here, not a fixed assumption.
- The break-even everyone quotes (cost divided by monthly savings) ignores your loan balance. Because the lower-rate loan also pays down faster, the total-cost break-even on the worked loan arrives at month 48, not month 62.
- Points are never refunded. Sell or refinance at year 3 on the worked loan and you are $1,488.59 behind, despite three years of lower payments.
- Points on a purchase are often deductible in the year paid; points on a refinance are usually spread over the loan’s life. The calculator does not model taxes.
- Quick Answer
- How to use the lender point calculator
- How lender points are priced
- Worked example: zero to three points on the same loan
- The break-even shortcut and its blind spot
- Points or a bigger down payment?
- What competing calculators miss
- What this calculator assumes
- Frequently asked questions
- Add This Calculator to Your Website
How to use the lender point calculator
Enter the loan as quoted, then read the break-even first: it is the number the whole decision turns on. Results stay hidden until you click Calculate, and Reset restores the worked example.
- Loan amount and term: the amount borrowed (not the home price) and the repayment period in years. Points are priced off the loan amount only.
- Interest rate without points: the no-points rate from your Loan Estimate. If you are weighing points on a refinance instead, the home loan refinance calculator prices the new loan itself.
- Points to buy: whole or fractional. Two points on a $300,000 loan is $6,000, and the tool rejects any combination that would push the new rate below zero.
- Rate reduction per point: use your lender’s real quote when you have one. The CFPB’s guidance on how to use lender credits and points is blunt that points have no fixed rate value, so a lender giving 0.125% per point doubles your break-even against one giving 0.25%.
- Years you expect to keep the loan: optional, and the most honest field on the page. With it filled in, the results add a total-cost comparison at that date, counting the remaining balance you would still owe under each scenario.
How lender points are priced
A point is prepaid interest: the lender collects interest at closing in exchange for charging less of it every month after. All of the math follows from the standard amortization formula, run twice, once at each rate.
New rate = Rate without points − (Points × Reduction per point)
Monthly payment = Loan × r × (1 + r)n ÷ ((1 + r)n − 1), where r is the monthly rate and n is the term in months
Break-even months = Cost of points ÷ Monthly payment savings
Net lifetime savings = (Total interest without points − Total interest with points) − Cost of points
Two pricing facts matter more than the formulas. First, by law the points on your Loan Estimate must be tied to a reduced interest rate: a charge labelled as points that buys no rate reduction is an origination fee wearing a friendlier name. Second, the reduction per point is set by each lender’s rate sheet on the day: the same point can buy 0.25% from one lender and 0.125% from another, so shopping the reduction matters as much as shopping the rate. To see how the two payments and balances evolve month by month, run the same figures through the amortization schedule calculator.
Worked example: zero to three points on the same loan
Every row is a real run of the calculator above on the $300,000, 30-year, 6.5% loan, changing only the points bought at the default 0.25% reduction per point.
| Points bought | Cost at closing | New rate | Monthly payment | Break-even | Net savings, full term |
|---|---|---|---|---|---|
| 0 points | $0.00 | 6.50% | $1,896.20 | n/a | $0.00 |
| 1 point | $3,000.00 | 6.25% | $1,847.15 | 61.16 months | $14,658.89 |
| 2 points (worked example) | $6,000.00 | 6.00% | $1,798.65 | 61.51 months | $29,118.90 |
| 3 points | $9,000.00 | 5.75% | $1,750.72 | 61.86 months | $43,374.78 |
Notice what the table makes obvious: at a constant reduction per point, the break-even barely moves (61 to 62 months) while the commitment triples. Each extra point is the same bet on the same horizon, just bigger. If the horizon is wrong, it is wrong three times over at 3 points.
The break-even shortcut and its blind spot
The standard break-even, cost divided by monthly savings, counts only the payments. It forgets that the lower-rate loan also builds equity faster: more of each payment hits principal, so at any sale date the balance you must repay is lower with points. Adding that balance difference is what the optional keep-years field does, and on the worked loan it moves the true crossover from month 62 to month 48.
Here is the same worked loan’s net benefit (total cost with points against without, balance included) at five horizons. The 3-year bar is the warning: a lower payment every month still leaves you behind if the loan ends early.
Points or a bigger down payment?
Both moves spend closing cash to cut the cost of the loan, but they work on different parts of it. Points shrink the rate on the full balance; a down payment shrinks the balance itself.
Buying points works when
- You will keep this loan well past the break-even, ideally a decade or more
- You already have 20% down, so no PMI is at stake
- Your lender’s reduction per point is at the strong end (0.25%)
- Cash reserves stay healthy after closing
A bigger down payment wins when
- The extra cash gets you to 20% down and removes PMI entirely
- You might move or refinance inside five years
- The points quote is weak (0.125% per point or less)
- A smaller loan is what makes the monthly budget work, not just a smaller rate
Run the down-payment version through the mortgage payment calculator with the reduced loan amount and compare the two payments honestly: the points scenario keeps the higher balance, which matters if you sell before the term ends. And because points are only one line of the cash due at signing, the closing cost percentage calculator shows what share of the price your total closing bill comes to.
What competing calculators miss
The established points tools are good at the simple break-even and stop there. Checked against their own published examples, their arithmetic is right; their scope is the gap.
- NerdWallet’s mortgage points calculator: the strongest rival, with a clean example ($3,000 for one point on $300,000, payment $1,996 to $1,946, break-even 60 months). Gap: the rate cut is whatever their scenario assumes, and the verdict stops at the simple break-even; there is no balance-aware horizon check.
- Quicken Loans’ worked example: accurate and unusually complete (1 point: $1,896 to $1,847, about 61 months, $17,640 over the term). Gap: it is an article table, not a tool that runs your loan, and it never asks how long you will keep the mortgage.
- wpcalc Mortgage Discount Points Calculator: a real tool with a years-in-home input, rare in this field. Gap: the rate with points is typed in directly with no per-point pricing, so you cannot compare what different lenders charge for the same point.
- OnlyCalculators Mortgage Points Calculator: honest about the rule-of-thumb cut and lets you enter an exact quoted rate instead. Gap: break-even only, and its formula adds closing costs into the numerator without a balance view at any horizon.
- NumericCore break-even calculator: fast and cites the CFPB framing. Gap: three inputs, one division; no payment, interest or horizon figures at all.
- The gap this page fills: the reduction per point as an explicit input, the full interest picture over the term, and a total-cost verdict at your own horizon that counts the remaining balance, the figure that actually decides whether points pay.
What this calculator assumes
Four assumptions are built into every result, stated so you can judge whether they fit your loan.
- Points are paid in cash at closing. If your lender lets you finance the points into the balance, the loan amount rises and every figure changes; raise the loan amount input by the financed cost to approximate it.
- The reduction is linear. Each point is priced at the same reduction. Real rate sheets are not linear: the third point often buys less than the first. If your lender quotes a rate for a specific number of points, set the reduction so the tool lands on that rate.
- Payments are principal and interest only. Taxes, homeowners insurance, HOA dues and PMI are excluded, as they are unaffected by points.
- No taxes, no lender credits. The possible deduction for points (year paid on a qualifying purchase, spread over the term on most refinances, per IRS Publication 936) is not modelled, and negative points (lender credits for a higher rate) are not supported: points below zero are rejected.
Frequently asked questions
A lender point, also called a discount point or mortgage point, is an upfront fee paid at closing in exchange for a lower interest rate. One point costs exactly 1% of the loan amount, so one point on a $300,000 loan is $3,000. Points are prepaid interest: you hand over cash now so that every monthly payment for the life of the loan is smaller.
There is no fixed amount. A common rule of thumb is about 0.25% per point, and this calculator defaults to that, but the Consumer Financial Protection Bureau notes that points have no fixed value in rate terms: one lender may give 0.25% for a point while another gives 0.125%. Enter the actual reduction your lender quotes in the rate reduction field.
Divide the cost of the points by the monthly payment savings. On the worked example, $6,000 divided by $97.55 a month gives 61.51 months, which the headline rounds up to 62 months (5 years and 2 months). Keep the loan longer than that and the points have paid for themselves on payment savings alone; the total-cost figures in the results, which also count your lower remaining balance, turn positive sooner.
Often, yes, but the timing differs. Under IRS Publication 936, points paid on a loan to buy your main home can generally be deducted in full in the year paid if all of the IRS tests are met; points on a refinance are usually deducted in equal amounts over the life of the loan. This calculator does not model taxes, so confirm your situation with a tax professional.
Yes. Most lenders sell fractional points, such as 0.5 or 1.375, and this calculator accepts any non-negative number, including decimals. Half a point on a $300,000 loan costs $1,500 and, at the default 0.25% per point, trims the rate by 0.125%.
No. Points are a fee paid at closing and are not refunded if you sell or refinance. That is the central risk of buying them: on the worked example, keeping the loan only 3 years leaves you $1,488.59 behind on a total-cost basis, even though the payment was lower every one of those months.
No. Discount points are optional and must be tied to a reduced interest rate on your Loan Estimate. Origination fees pay for the lender’s processing and underwriting work and buy you no rate reduction. Some lenders quote origination charges as points too, which is why the Loan Estimate itemizes discount points separately from other origination charges.
They solve different problems. Points only lower the rate; a bigger down payment lowers the amount you borrow, which cuts the payment and the interest and can remove private mortgage insurance at 20% down. If buying points would drain the cash that gets you to 20% down, the down payment usually wins. Run both: this calculator for the points, then compare the payment on the smaller loan.
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References
- Consumer Financial Protection Bureau. How Should I Use Lender Credits and Points (Also Called Discount Points)? Accessed October 22, 2026.
- Consumer Financial Protection Bureau. Loan Estimate Explainer. Accessed October 22, 2026.
- Consumer Financial Protection Bureau. Closing Disclosure Explainer. Accessed October 22, 2026.
- Consumer Financial Protection Bureau. Explore Interest Rates. Accessed October 22, 2026.
- Consumer Financial Protection Bureau. Your Home Loan Toolkit: A Step-by-Step Guide. Accessed October 22, 2026.
- Internal Revenue Service. Publication 936: Home Mortgage Interest Deduction. Accessed October 22, 2026.
- Internal Revenue Service. Topic No. 504: Home Mortgage Points. Accessed October 22, 2026.
- Freddie Mac. Primary Mortgage Market Survey. Accessed October 22, 2026.
- U.S. Department of Housing and Urban Development. Buying a Home. Accessed October 22, 2026.
- Electronic Code of Federal Regulations. 12 CFR 1026.19: Mortgage Loan Transactions, Timing and Disclosure Requirements. Accessed October 22, 2026.