Lenders often offer a lower interest rate if you pay discount points upfront. Whether that pays off comes down to one number: how long until the monthly savings repay the upfront cost. Enter your loan, the rate with and without points, and the cost of the points to see your break-even month.
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The calculator finds the monthly payment at each rate with the standard amortization formula Payment = Loan × r ÷ (1 − (1 + r)−n), where r is the monthly rate and n is the number of months, then takes the difference as your monthly savings. Dividing the upfront cost of the points by that monthly saving gives the break-even month, the point where your savings have fully repaid what you paid. Keep the loan past that month and the points come out ahead; sell or refinance sooner and you lose money. One discount point usually costs 1% of the loan amount and lowers the rate by a fraction of a percent.
A discount point is an upfront fee you pay the lender to lower your interest rate. One point usually costs 1% of the loan amount and commonly lowers the rate by a fraction of a percent.
Points rarely pay off if you expect to sell or refinance before the break-even month. If you plan to move in a few years, paying thousands upfront for a slightly lower rate usually loses money compared with keeping the cash.
It varies by lender and market, but one point often lowers the rate by roughly 0.125 to 0.25 percentage points. Always use the actual quoted rates with and without points, which is what this calculator asks for.
Discount points buy down your interest rate. Origination points are a lender fee for processing the loan and do not lower your rate. This tool is about discount points and their rate savings.
Discount points on a primary home purchase can sometimes be deducted, but the rules depend on your situation and current tax law. This calculator does not include any tax effect. Confirm deductibility with a qualified tax professional.
Disclaimer: This tool provides an estimate for general informational purposes only and is not financial or lending advice. It compares monthly payments and a simple break-even month; it does not include taxes, the time value of money, or how points are priced by each lender. Confirm exact rates, point costs, and fees with your lender before deciding.
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