Monthly payment savings and supporting figures
Both payments amortize the same loan over the same term. One point costs 1% of principal. Simple break-even uses payment savings alone and rounds up to a whole monthly payment.
For a comparison involving different loan amounts or terms, use the Loan Comparison Calculator instead of this equal-principal point-cost comparison.
The formula
Both payments amortize the same loan over the same term. One point costs 1% of principal. Simple break-even uses payment savings alone and rounds up to a whole monthly payment.
Worked mortgage points example
For a 300,000 mortgage, one point costs 3,000. With no other added cost, a rate reduction from 6.5% to 6.25% over 30 years lowers the payment by about 49.09 per month and recovers the cost after 62 payments.
How to use this calculator
- Enter mortgage amount, loan term, rate without points, rate with points, discount points.
- Set other additional upfront cost using the stated units or choices.
- Calculate and compare monthly payment savings, additional upfront cost, simple payment break-even, payment without points, payment with points.
Choosing inputs for mortgage points
Use actual rate offers from the lender. A point has a defined cost relative to principal, but it does not buy a universal rate reduction. The offered zero-point and point-paid rates must describe the same loan amount and term for this comparison to isolate the effect of the upfront expense.
The break-even measure answers how long monthly payment savings take to recover the added closing cost. It does not compare discounted cash flows or the different principal balances if the loan is sold or refinanced before maturity. For that reason it is a simple payment comparison rather than a complete economic valuation.
Interpreting monthly payment savings
Include only closing costs that differ between the two offers in the additional-cost input. Charges that are identical under both offers cancel out. If the point-paid rate provides no payment savings, a positive cost cannot be recovered through monthly payments, and the result says so instead of dividing by zero.
Assumptions & limitations
What this calculation assumes
- Rates remain fixed and both options have equal principal and term.
- Points and additional costs are paid upfront rather than financed.
What to keep in mind
- Tax deductions, opportunity cost, early sale balances, lender credits, and unrelated closing costs are excluded.
Common questions
Does one point always reduce the rate by 0.25%?
No. Enter the two quoted rates; a point specifies the cost, not a fixed rate reduction.
Should I include all closing costs?
Include only the additional costs of the point-paid offer beyond costs shared by both offers.
Does break-even include different payoff balances?
No. It compares upfront cost with cumulative payment savings. Early-sale balances and discounted cash flows need a fuller comparison.
Sources & further reading
Reviewed on