Mortgage Points
Calculator

One point (also called a discount point) costs 1% of the loan amount upfront and typically lowers your interest rate by roughly 0.25 percentage points, though the exact reduction varies by lender. You're essentially prepaying interest now in exchange for a lower rate for the life of the loan.

It comes down to the break-even period: divide the upfront cost of the points by the monthly savings they produce, which tells you how many months until the savings outweigh the cost. If you plan to keep the loan (not sell or refinance) longer than that break-even period, points are typically worth it.

Discount points are optional and directly buy down your interest rate, while origination points are a lender fee for processing the loan and don't affect your rate at all. Only discount points should factor into a rate-reduction versus cost analysis.

Yes — points are paid upfront at closing, so they increase the cash you need on closing day even though they reduce your monthly payment afterward. This upfront-versus-ongoing trade-off is exactly what the break-even calculation is meant to evaluate.

In many cases points paid on a primary residence purchase are tax-deductible in the year paid, subject to IRS rules, while points on a refinance are often deducted gradually over the loan term. Tax treatment depends on your specific situation, so this calculator's numbers are pre-tax and shouldn't replace advice from a tax professional.