Mortgage Points Calculator

1. Enter the loan amount. This is the amount you are borrowing, not the purchase price. If you are putting 20% down on a $400,000 home, the loan amount is $320,000.
2. Enter both interest rates. Your lender will quote you a rate with and without points. Enter the higher (no-points) rate and the lower (with-points) rate.
3. Enter the number of points. One point equals 1% of the loan amount. Buying 1 point on a $350,000 loan costs $3,500 and typically reduces the rate by about 0.25%.
4. Enter your planned stay in months. This is the most important variable. If you move or refinance before the break-even point, you lose money on the points purchase.

Example: on a $350,000 loan at 7.00%, buying 1 point ($3,500) drops the rate to 6.625%. The monthly savings is about $84. Break-even is $3,500 / $84 = 42 months (3.5 years). Stay longer than 42 months and you come out ahead.

Cost of points = Loan amount × (Points / 100)
Example: $350,000 × (1 / 100) = $3,500

Monthly payment formula:
  M = P × [r(1+r)^n] / [(1+r)^n - 1]
  P = principal, r = monthly rate, n = term in months

Monthly savings = Payment(no points) − Payment(with points)

Break-even (months) = Cost of points / Monthly savings

Net savings = (Monthly savings × Months you stay) − Cost of points

How much does 1 point typically reduce the rate? It varies by lender and market conditions. The common rule of thumb is 0.25% per point, but in 2024 it ranges from 0.125% to 0.375% per point. Always ask your lender for the exact rate reduction per point before committing.