Calculate whether buying mortgage discount points is worth it with break-even timeline and total interest savings comparison.
Two versions of the same loan are run side by side here: one priced with discount points paid at closing for a lower rate, the other at the higher rate with nothing paid. The calculator returns the monthly payment for each, the monthly saving the lower rate produces, the break-even month when accumulated savings overtake the point cost, and the interest saved if the loan runs its full term. What usually surprises buyers is how distant that break-even is, often five years or more, and that the headline interest-savings figure assumes a loan held to maturity, which most mortgages are not.
A concrete input and expected output from the current implementation.
Input
Loan amount $300,000; 30-year term; rate without points 6.5%; 1 point costing $3,000 (1% of the loan) buying the rate down to 6.25%.
Expected output
Monthly payment without points: $1,896.20. With 1 point: $1,847.15. Monthly saving: $49.05. Break-even: about 61 months, roughly 5.1 years. Total interest saved over the full 30-year term: about $17,658, or about $14,658 net of the $3,000 point cost.
Each point costs 1% of the loan amount, and under the standard 0.25-per-point assumption the rate drops from 6.5% to 6.25%, cutting the payment by $49.05. Dividing the $3,000 cost by that monthly saving gives the 61-month break-even; multiplying the saving across 360 payments gives the full-term interest saved.
Both scenarios are amortized with the standard fixed-rate payment formula using the same loan amount and term, differing only in rate. Each run produces a constant monthly payment and a total-interest figure, and the tool compares the two directly: the payment difference is the monthly benefit the points produce, and the total-interest difference is the saving at full term.
The break-even month is point cost divided by monthly saving: on a $300,000 loan one point costs $3,000, and a $49.05 monthly saving recovers that cost at month 61. The total interest saved is the payment difference multiplied across all 360 payments. Both results assume the lower rate holds for the life of the loan, with no refinance and no early payoff.
No. The 0.25 percent figure is a working assumption, not a guarantee. Lenders set the reduction through their own pricing, which varies with market conditions, loan size, and credit profile. Ask the lender what rate your points actually buy on your quote, then enter those two rates in the calculator rather than assuming.
Often, with conditions. Points paid to buy a home are generally deductible as mortgage interest in the year paid when the IRS requirements in Publication 936 are met; points on a refinance are usually deducted across the loan's life. This calculator ignores taxes entirely, so confirm the treatment with IRS guidance or a tax professional.
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