Discount Points Calculator
Find out what discount points would cost, how much they would lower your monthly payment, and how long it would take to break even.
Are Discount Points Worth Paying?
A discount point is prepaid interest. One point costs 1% of the loan amount and lowers your interest rate for the life of the loan. How much the rate drops per point changes with the market and from lender to lender.
Enter the loan amount, the rate with and without points, and the cost of the points. The calculator shows the monthly savings and how many months it takes for those savings to repay the cost. If you expect to keep the loan longer than the break-even period, points can make sense. If you may sell or refinance sooner, you are usually better off keeping the cash.
Example: On a $500,000 loan, one point costs $5,000. If it lowers the rate from 6.5% to 6.25%, the payment drops by about $82 a month, and the break-even point is about 61 months, or just over five years.
Common Questions
How much does one point lower the rate?
It varies. A quarter of a percent per point is a common figure, but pricing changes daily. We can show you several rate and point combinations for your loan.
Can the seller pay for my points?
Yes. Seller credits can be used toward points and other closing costs, within the limits for your loan type.
Are discount points tax deductible?
Points on a purchase loan for your primary home are often deductible in the year paid. Refinance points are usually deducted over the life of the loan. Check with your tax advisor.