{
  "slug": "mortgage-points-breakeven",
  "title": "Mortgage Discount Points Breakeven Calculator",
  "heading": "Mortgage Points Breakeven Calculator",
  "category": "financial",
  "url": "https://www.revenuelab.fyi/toolbox/mortgage-points-breakeven",
  "summary": "Find out exactly how long it takes discount points to pay for themselves.",
  "description": "Discount points let you prepay interest upfront (typically 1% of the loan amount per point) in exchange for a lower rate, usually around 0.125–0.25% per point depending on the lender and market conditions. Whether that trade makes sense depends entirely on how long you'll keep the loan: pay points and sell or refinance too soon, and you've handed the bank cash for a discount you never fully used. This calculator computes the exact monthly savings from the lower rate, divides that into the upfront cost of the points, and gives you the breakeven month — compare that against your realistic time horizon in the home to decide if points are worth buying.",
  "formula": "Cost of points = loan amount × points × 1%. Monthly savings = payment at original rate − payment at reduced rate. Breakeven months = cost of points ÷ monthly savings.",
  "dateModified": "2026-09-30",
  "run_url": "https://www.revenuelab.fyi/api/public/calc?tool=mortgage-points-breakeven",
  "inputs": [
    {
      "id": "loanAmount",
      "label": "Loan amount",
      "kind": "number",
      "hint": null,
      "default": 400000,
      "unit": "$",
      "min": 0,
      "max": null
    },
    {
      "id": "baseRate",
      "label": "Rate without points",
      "kind": "number",
      "hint": null,
      "default": 6.75,
      "unit": "%",
      "min": 0,
      "max": 12
    },
    {
      "id": "points",
      "label": "Points purchased",
      "kind": "number",
      "hint": null,
      "default": 2,
      "unit": null,
      "min": 0,
      "max": 5
    },
    {
      "id": "rateReductionPerPoint",
      "label": "Rate reduction per point",
      "kind": "number",
      "hint": null,
      "default": 0.25,
      "unit": "%",
      "min": 0,
      "max": 1
    },
    {
      "id": "termYears",
      "label": "Loan term",
      "kind": "number",
      "hint": null,
      "default": 30,
      "unit": "years",
      "min": 5,
      "max": 30
    },
    {
      "id": "yearsInHome",
      "label": "Years you expect to keep this loan",
      "kind": "number",
      "hint": null,
      "default": 7,
      "unit": null,
      "min": 1,
      "max": 30
    }
  ],
  "outputs": [
    {
      "id": "breakevenMonths",
      "label": "Months to break even",
      "format": "number",
      "hint": null,
      "primary": true
    },
    {
      "id": "monthlySavings",
      "label": "Monthly payment savings",
      "format": "currency",
      "hint": null,
      "primary": false
    },
    {
      "id": "costOfPoints",
      "label": "Upfront cost of points",
      "format": "currency",
      "hint": null,
      "primary": false
    },
    {
      "id": "totalSavingsOverStay",
      "label": "Net savings over your expected stay",
      "format": "currency",
      "hint": null,
      "primary": false
    }
  ],
  "worked_example": {
    "inputs": [
      "Loan amount: 400000 $",
      "Rate without points: 6.75 %",
      "Points purchased: 2",
      "Rate reduction per point: 0.25 %",
      "Loan term: 30 years",
      "Years you expect to keep this loan: 7"
    ],
    "outputs": [
      "Months to break even: 61",
      "Monthly payment savings: $132",
      "Upfront cost of points: $8,000",
      "Net savings over your expected stay: $3,048"
    ]
  },
  "how_to": {
    "title": "How to use this",
    "steps": [
      "Enter loan amount ($).",
      "Enter rate without points (%).",
      "Enter points purchased.",
      "Enter rate reduction per point (%).",
      "Enter loan term (years).",
      "Enter years you expect to keep this loan.",
      "Read your months to break even on the right — it updates as you type.",
      "Hit Share to keep the scenario or send it to someone."
    ]
  },
  "scenarios": [
    {
      "name": "Conservative",
      "description": "Lower-end numbers — what if things land soft?",
      "values": {
        "loanAmount": 240000,
        "baseRate": 4.05,
        "points": 1.2,
        "rateReductionPerPoint": 0.15,
        "termYears": 18,
        "yearsInHome": 4
      }
    },
    {
      "name": "Typical",
      "description": "Defaults — the most common real-world setup.",
      "values": {
        "loanAmount": 400000,
        "baseRate": 6.75,
        "points": 2,
        "rateReductionPerPoint": 0.25,
        "termYears": 30,
        "yearsInHome": 7
      }
    },
    {
      "name": "Ambitious",
      "description": "Higher-end numbers — what if things really pop?",
      "values": {
        "loanAmount": 640000,
        "baseRate": 10.8,
        "points": 3.2,
        "rateReductionPerPoint": 0.4,
        "termYears": 30,
        "yearsInHome": 11
      }
    }
  ],
  "limitations": [
    "Results are estimates before tax, fees, and inflation unless an input explicitly covers them.",
    "Rates are treated as fixed for the whole period — variable-rate products will drift from this projection.",
    "This is educational maths, not financial advice. Check anything contractual with the lender or your accountant."
  ],
  "faq": [
    {
      "q": "Is 0.25% rate reduction per point typical?",
      "a": "It's a common rough benchmark but varies by lender, loan type, and market rate environment — sometimes it's closer to 0.125% per point, sometimes more in volatile rate periods. Always ask your loan officer for the specific rate sheet showing the price of each point rather than assuming a standard figure."
    },
    {
      "q": "Are mortgage points tax deductible?",
      "a": "Points paid on a purchase loan for your primary residence are generally deductible in the year paid if you itemize and meet IRS requirements (loan is secured by your main home, points are a standard business practice in your area, and other conditions). Points on a refinance usually must be amortized over the loan term instead of deducted immediately. Check current IRS Publication 936 guidance for your situation."
    },
    {
      "q": "What if I sell or refinance before the breakeven point?",
      "a": "You lose money on the points — you paid for a discount you didn't hold long enough to benefit from. This is exactly why the 'years you expect to keep this loan' input matters more than the headline breakeven number: compare your realistic timeline honestly, including the odds you refinance again if rates drop."
    },
    {
      "q": "Should I use extra cash for points or a bigger down payment instead?",
      "a": "A bigger down payment reduces your loan amount and can eliminate PMI, which is often a better guaranteed return than points, especially if you're near a PMI cutoff (typically 20% equity). Compare the point discount rate against the cost of PMI you'd otherwise pay before choosing."
    }
  ],
  "related": [
    "https://www.revenuelab.fyi/toolbox/mortgage-recast-vs-refinance",
    "https://www.revenuelab.fyi/toolbox/cash-out-refi-breakeven",
    "https://www.revenuelab.fyi/toolbox/heloc-draw-cost"
  ],
  "license": "CC-BY-4.0",
  "citation": "RevenueLab — Mortgage Discount Points Breakeven Calculator (https://www.revenuelab.fyi/toolbox/mortgage-points-breakeven)"
}