Mortgage Points Break-Even Calculator
Whether paying for discount points to lower a loan's rate is worth it: the payment with and without them, and how many months it takes to recover their cost.
Results
Months to break even
69.9
months
Monthly payment without points
954.83
Monthly payment with points
926.23
Saved each month
28.60
Cost of the points
2000.00
Net saving after those months
1431.93
The dashed line marks the value you entered.
What this tool does
Buying points means paying part of the interest up front in exchange for a lower rate. It only pays off if you keep the loan longer than the break-even point — sell, refinance or repay early before then and the points were money lost. This uses the simple, widely used comparison of monthly payments; it ignores that the cheaper loan also repays principal slightly faster, and what the up-front money could have earned elsewhere, so treat the break-even as approximate.
Formula
PMT = L × i ÷ (1 − (1 + i)^−n) · break-even = cost of points ÷ (PMT₀ − PMT₁)
Variables
| Symbol | Meaning | Unit |
|---|---|---|
la | Loan amount | — |
r0 | Interest rate without points | % |
r1 | Interest rate with points | % |
pt | Points bought (1 point = 1 % of the loan) | — |
yr | Loan term | a |
km | Months you expect to keep the loan | months |
BE | Months to break even | months |
M0 | Monthly payment without points | — |
M1 | Monthly payment with points | — |
SV | Saved each month | — |
CO | Cost of the points | — |
NS | Net saving after those months | — |
Worked example
- Loan amount200,000
- Interest rate without points4 %
- Interest rate with points3.75 %
- Points bought (1 point = 1 % of the loan)1
- Loan term30 a
- Months you expect to keep the loan120 months
- Months to break even69.9 months
- Monthly payment without points954.83
- Monthly payment with points926.23
- Saved each month28.60
- Cost of the points2000.00
- Net saving after those months1431.93
Limitations
- This is an informational calculator, not personalised financial advice. Rates, fees, taxes and contract conditions vary between institutions and countries.
- The result is an estimate based only on the values you type. Real situations often include factors this calculator does not know about.