Mortgage points break-even calculator

Compare the same loan amount and term with and without discount points. The calculator translates points into an upfront dollar cost, calculates both principal and interest payments, and shows when the payment savings would recover that extra cost. You enter the discounted rate yourself because the tool assumes no fixed rate reduction per point.

Worked example from an official source

Source: CFPB points and lender credits example.

Use two rates for the same comparison

The CFPB points explanation describes points as a tradeoff: paying more at closing in exchange for a lower interest rate. Keep the amount and term the same so the payment difference measures the rate change you entered. If other fees differ between the options, this points-only calculation will not capture those differences. Write those costs down separately before interpreting the result. A rate copied from a national mortgage survey is not evidence of the rate discount associated with a particular number of points.

Understand the upfront cost

One discount point equals one percent of the loan amount, according to the CFPB. Fractional points are allowed. Enter the point count as quoted, rather than entering a dollar amount in the points field. The calculator multiplies the loan amount by points divided by one hundred to obtain the cost. It then compares unrounded monthly payments and displays dollars rounded to cents. The worked example below uses the CFPB published inputs so you can inspect the calculation without treating the example rates as available pricing.

Compare the recovery month with your plans

Points cost is paid upfront in this model. The recovery month is the first whole month in which accumulated principal and interest savings would cover that cost. The tool shows no break-even if the rate with points produces no positive payment savings. It marks recovery beyond the loan period if the savings would need more payments than the term includes. This is a simple cash-flow comparison and does not assume interest earned on cash kept instead of paying points. It also excludes tax treatment and any fees charged when the loan ends.

Check what the quoted points mean

The CFPB notes that the word points can be used for upfront fees that do not reduce an interest rate. Confirm that the inputs describe discount points connected to the rate you are comparing. The calculator does not interpret a Loan Estimate or identify whether an entered fee is a discount point. It only performs the arithmetic for the two rate options you supply. Its lifetime interest benefit after points subtracts the upfront points cost from the full-term interest difference. If you plan to end the loan earlier, use the recovery month as one piece of the comparison and review the actual documents for all costs.

How it works

P is the borrowed principal, M is the monthly principal and interest payment, r is the monthly interest rate, and n is the number of monthly payments. At a zero interest rate, M = P / n. The CFPB payment explanation describes a fixed-rate payment that fully repays the loan by the end of its term. This is the standard amortization formula for that payment.

Points cost = principal * points / 100. Monthly savings = payment without points - payment with points. Recovery month = ceiling(points cost / positive monthly savings), subject to the loan term. CFPB points explanation supplies the point-to-cost definition. The Federal Reserve worksheet describes recovering costs through payment savings. This version excludes tax adjustments.