Is buying down your rate worth it? Find the break-even month
Updated 2026-09-28
One discount point costs 1% of the loan amount and lowers your rate. To see if points are worth it, divide the cost of the points by the monthly payment savings: that is the break-even month. Enter the loan, both rates and how long you plan to keep the loan, and the calculator shows the break-even month and your net savings. run a refinance break-even · check the full monthly payment · see the amortization schedule.
Compare two quotes
Break-even
Points pay for themselves after
5 years 1 month
Cost of points
$4,000
Monthly savings
$66.12
Net result at your horizon
$3,039
Interest saved over full term
$23,803
Estimates for planning, not a loan offer or financial advice. Every rate and cost here is a number you enter or an example you can change; confirm figures with your lender.
How discount points work
A discount point is prepaid interest: you pay 1% of the loan amount at closing and the lender lowers your rate. The trade is simple — cash now for a smaller payment every month — so the question is how many months of smaller payments it takes to earn the cash back.
Cost = points × 1% × loan Break-even months = cost ÷ (payment without points − payment with points)
Worked example
On a $400,000 30-year loan, suppose a lender quotes 6.75% with no points or 6.5% with one point. The point costs $4,000. The payment falls from $2,594.39 to $2,528.27, saving $66.12 a month, so the point breaks even after 5 years 1 month. Keep the loan 7 years and the net gain is about $3,039, counting the lower balance you would owe at that point. Two points for 6.25% would cost $8,000, save $131.52 a month and break even after 5 years 1 month.
Why the net result counts your balance
A lower rate also means slightly more of each payment goes to principal, so if you sell or refinance, you owe a little less. The "net result" figure adds that difference to the payment savings and subtracts the cost of the points, which makes it a fairer test for short horizons than payment savings alone.
When points tend not to pay
You may move or refinance within a few years — for example if rates might fall and you would refinance.
The cash would otherwise go to the down payment and let you avoid PMI or get a better rate tier.
You have little cash left for reserves or repairs after closing.
Pricing differs by lender, so compare Loan Estimates on the same day. Once you know the rate, check the full payment with the mortgage calculator; if you are refinancing, add the points to your closing costs in the refinance break-even calculator.
Frequently asked questions
How much does one mortgage point cost?
One point is 1% of the loan amount, so on a $400,000 loan one point costs $4,000 and two points cost $8,000. How much each point lowers the rate varies by lender; use the rates on your loan estimate.
What is one mortgage point?
One discount point is a fee equal to 1% of the loan amount, paid at closing in exchange for a lower interest rate. On a $400,000 loan one point costs $4,000. How much the rate drops per point varies by lender and day, so use the rates from your Loan Estimate.
How do I know if buying points is worth it?
Divide the cost of the points by the monthly payment savings to get the break-even month. If you expect to keep the loan (not sell or refinance) longer than that, the points pay off.
Are mortgage points tax deductible?
Points paid on a loan to buy your main home can often be deducted in the year paid if you itemize and meet IRS conditions; points on a refinance are usually deducted over the life of the loan. See IRS Publication 936 or a tax professional.
Are lender credits the opposite of points?
Yes. With lender credits you accept a higher rate and the lender pays part of your closing costs. To compare, run this calculator with the credit quote as the 'no points' rate and the lower-rate quote with its points.