Mortgage Points Break-Even Calculator

Discount points are prepaid interest: money now for a lower rate later. Whether that is a good trade depends on one thing — how long you keep the loan. Buy points and sell or refinance in three years and you have simply paid more.

The break-even below is the month at which the accumulated monthly savings finally exceed what the points cost.

The assumption that decides it

How long you keep the loan, not the house. Refinancing ends the loan just as selling does, and the average mortgage is retired far sooner than its term. If rates are historically high when you borrow, the chance of refinancing within a few years is higher — which argues against paying for a lower rate you may not keep.

Lender credits are the same trade in reverse

Instead of paying points for a lower rate, you can accept a higher rate in exchange for the lender covering closing costs. Run the same break-even in reverse: if you will be gone before it, taking the credit is the better side of the deal.