Discount Points Guide

Mortgage Points Calculator: Are Discount Points Worth Buying?

George Smith
George Smith — Founder, Klickify Agency

Your lender offers you a deal. Pay $3,000 upfront and lower your interest rate from 6.8% to 6.5%. You ask, "Is that worth it?" The lender says, "You will save $150 per month." You do the math: $3,000 / $150 = 20 months break-even. That seems good. But is that the whole picture?

Mortgage points (also called discount points) are prepaid interest. One point costs 1% of the loan amount and lowers your interest rate by about 0.25% (but this varies by lender). On a $300,000 loan, one point costs $3,000 and might lower your rate from 6.8% to 6.55%. The monthly payment drops by about $50. Break-even is 60 months (5 years). That is longer than most people think.

Most online points calculators are designed to make points look attractive because lenders make money on points. Bankrate's calculator will show a short break-even period — they assume you will sell or refinance early, which is not true for everyone. NerdWallet's calculator is better, but it pushes you to "compare lenders" which means giving up your email. Truly Free Mortgage Calculator has a points calculator that shows the real break-even, including the opportunity cost of that $3,000.

The Real Math of Mortgage Points

Let me use a realistic example. You are borrowing $300,000 at 6.8% for 30 years. Your base payment (principal + interest) is $1,956. The lender offers you to buy one point for $3,000, reducing your rate to 6.55%. The new payment is $1,906. Monthly savings = $50.

Break-even in months = $3,000 / $50 = 60 months (5 years). If you stay in the home for more than 5 years, buying the point saves you money. If you sell or refinance before 5 years, you lose money.

But there is another factor: the time value of money. If you did not spend that $3,000 on points, you could invest it. At a 5% after-tax return, that $3,000 would grow to $3,828 in 5 years. Meanwhile, your monthly savings of $50 invested each month would grow to about $3,400. The difference is small. The bigger factor is the break-even timeline.

What about two points? That costs $6,000 and might lower your rate to 6.3%. New payment $1,857, savings $99 per month. Break-even = $6,000 / $99 = 60.6 months (still about 5 years). Points have diminishing returns. One point saves $50, the second point saves $49, the third point saves $48. So the break-even remains similar.

The decision comes down to how long you will keep the loan. If you are buying your "forever home," buying points can make sense. If you might move in 3 years for a job, do not buy points.

Step-by-Step: Use the Mortgage Points Calculator

1. Go to trulyfreemortgage.com and select Points Calculator
Found under "Advanced Mortgage Tools."
2. Enter your loan amount
Example: $300,000.
3. Enter the base interest rate (without points)
Example: 6.8%.
4. Enter the number of points you are considering (1, 2, or fractional)
Example: 1 point.
5. Enter the interest rate after buying points
Your lender should tell you the new rate. Example: 6.55%. The calculator can also estimate the rate reduction (typically 0.25% per point).
6. Enter the cost per point (usually 1% of loan amount)
For $300,000, one point costs $3,000.
7. Click "Calculate"
The calculator will show your monthly savings, total point cost, break-even in months and years, and total interest saved over 30 years.
8. Adjust the "years you plan to stay" slider
If you plan to stay only 3 years, the calculator will show that buying points loses money. If you plan to stay 10 years, it saves money.

The Lead-Gen Problem With Free Mortgage Calculators

Bankrate's points calculator is embedded in a page that also has a "Find a Lender" form. They want you to believe that buying points is always a good idea because they make money from the lenders who sell points. Bankrate earns a commission when you close a loan with one of their partners, and points increase the lender's profit.

NerdWallet's points tool is more neutral, but to see a personalized calculation, you need to enter your loan details into their "rate comparison" tool. That tool requires your email and phone number.

LendingTree does not have a standalone points calculator. They want you to apply for a loan first. Once you are in their system, they will try to upsell you on points.

Truly Free Mortgage Calculator shows the numbers without any bias. Points are not good or bad. They are a trade-off between upfront cash and long-term savings. My calculator helps you decide based on your timeline.

Calculate Your Points Break-Even Free

No account. No email. Runs in your browser.

Frequently Asked Questions

Is it better to buy points or make a larger down payment?
Compare the break-even. A larger down payment reduces your loan amount and eliminates PMI. That often has a shorter break-even than points. Run both scenarios in my calculator. For most people, a larger down payment is better than buying points.
Are mortgage points tax-deductible?
Yes, in the year of purchase. Points paid on a primary residence purchase are fully deductible as mortgage interest in the year you pay them, as long as the points are standard for your area. For refinance points, you deduct them over the life of the loan.
Can I negotiate points with my lender?
Yes. Points are negotiable. Lenders have discretion. You can ask for a lower rate without points, or ask for a credit from the lender to cover closing costs instead of paying points.
How much does one point lower your rate in 2026?
Typically 0.20% to 0.30%. For a 6.8% base rate, one point might bring you to 6.55%. The exact reduction depends on the lender and market conditions.
Should I buy points if I plan to refinance in 2 years?
No. You will not recoup the cost. Only buy points if you are confident you will keep the loan beyond the break-even period.
Do points make sense for a 15-year mortgage?
Less so because the loan term is shorter. A 15-year loan at 6.2% has a higher monthly payment. The break-even for points on a 15-year loan is similar in months, but you have fewer months to enjoy the savings. Only buy points on a 15-year if you are certain you will not pay off early.

Run the points calculator before you agree to anything. Lenders make money when you buy points. Make sure you are not paying for a benefit you will never use.

Figures on this page are for educational purposes only. Rates and point pricing vary by lender, location, and borrower profile. Consult a licensed lender for loan-specific figures. Truly Free Mortgage Calculator does not collect personal data and does not connect users with lenders.

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George Smith
WRITTEN BY
George Smith
Founder, Klickify Agency
info@klickifyagency.comLinkedIn
George builds free web tools that respect user privacy. Founder of Klickify Agency.