Mortgage Points Calculator

Mortgage points (also called discount points) are upfront fees paid at closing to lower your interest rate. Each point costs 1% of the loan amount and typically reduces your rate by 0.25%. For example, on a $300,000 loan, one point costs $3,000 and might lower your rate from 7% to 6.75%, saving about $50/month.

One mortgage point costs exactly 1% of your loan amount. On a $200,000 loan, one point costs $2,000. On a $400,000 loan, one point costs $4,000. Each point typically reduces your interest rate by 0.125% to 0.25%, depending on the lender and market conditions.

The break-even point is when your monthly savings equal the cost of the points. Formula: Cost of Points / Monthly Savings = Months to Break Even. For example, if one point costs $3,000 and saves $50/month, break-even is 60 months (5 years). If you stay past break-even, you profit from buying points.

Compare the returns: points lower your rate permanently, while a larger down payment reduces your loan amount and may eliminate PMI. If PMI is a factor, the down payment might be better. If your rate is high, points could save more. Run both scenarios in our calculator to see which provides better long-term savings.

Most lenders allow 1-3 discount points, though some may offer more. There's no legal limit, but buying too many points may not provide proportional benefits. The key is whether you'll stay in the home long enough to recoup the cost through monthly savings.

Yes, mortgage points are generally tax deductible in the year you pay them for your primary residence. They're treated as prepaid interest. However, points on a second home or investment property may need to be deducted over the life of the loan. Consult a tax professional for your specific situation.