Mortgage Discount Points Cost Calculator

What Discount Points Actually Cost

The arithmetic is direct: on a $400,000 loan, one point costs $4,000; on a $250,000 loan, $2,500. Lenders sometimes offer fractional points — half a point on $400,000 is $2,000 — so the buy-in can be scaled to match available cash.

What each point buys in rate reduction is not standardised. One point commonly lowers the rate by roughly 0.25 percentage points, but the exchange varies by lender and prevailing conditions. That makes comparing point pricing across lenders as important as comparing the base rate itself.

Because points are prepaid interest, they are generally tax-deductible in the year of purchase for a primary-residence mortgage. For a refinance, the deduction is typically spread across the loan term. The deduction can narrow the effective cost of buying points, though individual tax situations vary — consult a tax professional for specifics.

Finding Your Break-Even Month

The break-even calculation divides the upfront point cost by the monthly payment reduction. If one point on your loan costs $3,000 and lowers the monthly payment by $50, the break-even is 60 months — five years. Stay in the home or keep the mortgage past that point and the savings accumulate every additional month.

That timeline is the deciding factor. Borrowers who expect to sell within three years or who are likely to refinance if rates fall further rarely recoup the cost. Buyers planning a decade-plus hold have a strong case, because the savings compound well beyond the break-even threshold.

The points break-even calculator focuses purely on that timeline. This tool adds the dollar-cost dimension, showing how loan size and fractional-point options change the upfront outlay — useful when weighing points against applying extra cash to the down payment instead.

Rate reduction per point varies by lender. The calculator uses the rate inputs you provide rather than assuming a fixed exchange ratio.