understanding it
The break-even is the whole question
Mortgage points are prepaid interest: cash at closing in exchange for a lower rate. Whether they are worth it reduces to one number, the break-even month: the cost of the points divided by the monthly savings the lower rate buys. Keep the loan past that month and the points pay off every month after. Sell or refinance before it and you paid for a discount you did not finish using. This calculator computes that month from your two actual rate quotes.
Use your real quotes, not a rule of thumb
The old shorthand says one point buys a quarter of a percent. Lender pricing does not honor the shorthand: the rate a point buys moves with the market, the loan type, and the day. That is why this page asks for the rate without points and the rate with them, straight from your Loan Estimate or rate sheet. The arithmetic is only as good as the quotes, and the quotes are the one input your lender has already handed you.
How to read your result
A break-even around five years means the points are a bet that you will still hold this exact loan in five years: same house, no refinance. Some buyers can say that with confidence. Most underrate how often life moves them: the median owner moves well before a 30-year loan matures, and any meaningful rate drop invites a refinance that erases the buydown. The lifetime-savings figure this tool shows assumes the loan runs to term; treat it as the ceiling on the bet, not the expected value.
Where the cash could go instead
Points compete with every other use of closing-day cash: a larger down payment, keeping your reserves intact, or simply a cheaper offer. In a seller-paid form they also compete with concessions, since a seller credit can fund a buydown. If the break-even lands beyond your honest horizon, the same cash usually works harder in the down payment, and the concessions comparison one tool over shows that trade directly.
Common questions
What is a mortgage point?
A fee paid at closing to lower your interest rate, priced as a percentage of the loan: one point is 1% of the loan amount. How much rate one point buys varies by lender and by day, which is why this calculator asks for your two actual quotes instead of assuming a fixed reduction.
How do I know if points are worth it?
Divide the cost of the points by the monthly savings they buy; that is the break-even in months. If you are confident you will keep this loan past that month without refinancing or selling, the points pay off from then on. If your horizon is shorter or uncertain, the cash does more for you elsewhere.
What happens to the points if I refinance?
They are gone. Points buy down the rate on this loan only, and a refinance replaces the loan. Buyers who bought points in a high-rate period and refinanced when rates fell paid for a discount they only briefly used, which is the quiet risk in every buydown.
Should I use spare cash for points or a bigger down payment?
They compete for the same dollars. A bigger down payment shrinks the loan itself and can eliminate mortgage insurance at certain thresholds; points shrink the rate on the loan you keep. Compare the monthly effect of each with the same cash before deciding, and remember the down payment survives a refinance while points do not.