Mortgage Points vs Down Payment Calculator
With limited cash, you face a choice: buy discount points to lower the rate or put that money toward a larger down payment to reduce the balance and possibly eliminate PMI. The better option depends on how long you keep the loan. Enter both scenarios in the calculator above to see which allocation saves more.
The buydown offer
—
$0 up front to save $0 a month
- Payment without points
- $0.00
- Payment with points
- $0.00
- Rate after buydown
- 0%
- Saved by then
- $0
- Net after the points cost
- $0
—
What Each Dollar Buys You
A larger down payment reduces the principal balance directly. On a $350,000 home, increasing the down payment from 10 percent to 15 percent moves the loan from $315,000 to $297,500 — a $17,500 reduction. That smaller balance lowers every future payment and the total interest over the life of the loan, regardless of how long you stay.
If the extra cash pushes the down payment to 20 percent or above, PMI disappears entirely. That alone can save $100 to $200 per month depending on the loan size and credit score, delivering guaranteed savings from day one with no break-even period.
Discount points, by contrast, leave the loan balance unchanged but reduce the rate. One point costs one percent of the loan amount and typically lowers the rate by a fraction of a point. The savings accrue monthly but require time to recoup the upfront cost — time you may not have if you sell or refinance early.
The Holding-Period Tipping Point
For short holding periods — under five years — a larger down payment almost always wins. The balance reduction is immediate, the interest saving begins with the first payment, and there is no break-even delay. If the extra cash also eliminates PMI, the advantage compounds further.
For longer holding periods — ten years or more — points become competitive because the cumulative monthly savings eventually surpass the upfront cost. The exact crossover depends on the rate reduction per point, which varies by lender and market conditions at the time you lock.
The murky zone is the five-to-eight-year range, where the answer depends on specifics. This is precisely where the calculator adds the most value: it shows the month-by-month cost comparison so you can judge whether your plans clear the crossover safely. Pair it with the points break-even calculator for a granular view of the points-only side, or the affordability calculator to see how a higher down payment changes your maximum purchase price.
Rate reductions per point vary by lender. The calculator uses the figures you enter to compare both strategies on equal terms.