Should You Buy Points? The Break-Even on a Rate Buydown

Embed the calculator in your page

The loan, the term, the rate with no points, the points, what each costs and cuts, how long you will keep the loan, and who pays in; both payments, the two break-evens, the position at your horizon, the return the points earn, a table by points count, the two loans' interest drawn as lines, and the seller credit set against a price cut out. In a frame it carries no cookies, no tracking, and a visible link back to the methodology. Your site has to allow frames; most do. The link that opens it in a small window is on the professionals page.

In plain words.

Discount points are cash paid at closing to lower the rate on a mortgage. Each point costs a share of the loan, one percent by convention, and lowers the rate by an amount the lender quotes. This tool prices the loan with and without the points, counts the interest each one charges month by month, and finds the month the points have paid for themselves. It then measures your position at the year you expect to sell or refinance, and works out the yearly return the points earn to that point, so you can set it beside the rate on the loan itself.

Why it matters.

Points are a bet on staying. Sold or refinanced too soon, the cash is gone and most of the saving never arrived. The break-even says when the bet pays. The horizon says whether you will be there to collect.

An example.

$400,000 for 30 years at 6.75%, one point costing $4,000 for a cut to 6.50%: the payment falls by about $66 a month, the rule of thumb says 61 months, and the interest count says 48 months. Kept 7 years, the point leaves you ahead by about $3,039 and earns about 14.6% a year on its cost.

Where it stops.

The rate cut per point is the lender's to quote and often shrinks after the first point. The tool counts nominal dollars, holds the rate steady, and assumes you make every scheduled payment. It leaves out the tax treatment of points, which it states but does not compute, and what the cash could have earned elsewhere, other than the loan's own rate.

The facts

Six quotable sentences on when buying down the rate pays.

The button shows exactly what your reader sees when they click the link. Paste the link where a link goes; it opens this list in a small window, always current as of the record, with the attribution and a link to the full page. Nothing to copy out, nothing to update later.

1. A discount point is cash paid at closing to lower the rate on a mortgage. The convention is that one point costs 1% of the loan, and the rate cut it buys is the lender's to quote: about 0.25% a point is common, and the cut often shrinks after the first point.
2. The rule of thumb divides what the points cost by the drop in the monthly payment. The truer count follows the interest each loan charges month by month, and it is a little shorter, because the lower rate also pays the balance down faster, so the bought-down loan is ahead by more than the payment saving alone.
3. Example: $400,000 for 30 years at 6.75%, one point for a 0.25% cut. The point costs $4,000 and the payment falls from $2,594.39 to $2,528.27. The rule of thumb says 61 months and the interest count says 48 months. Kept 7 years, the point leaves you ahead by about $3,039.
4. When every point buys the same cut, every count pays for itself in the same month, so more points buy a larger saving, not a sooner one. When the cut shrinks, the break-even stretches: at 0.125% a point instead of 0.25%, the same point takes 96 months to pay for itself and leaves you behind at 7 years.
5. Points are an investment, and the return is the payment saving plus the lower balance owed when you leave. Kept 7 years, the example point earns about 14.6% a year, well above the 6.75% the same cash would have earned paying down the loan. Kept 3 years it earns a loss of about 14.7% a year, because the points were paid and most of the saving never arrived.
6. A seller credit toward points costs you nothing, so it has paid for itself on day one. The fair question is whether the same dollars would do more as a price cut. In the example the credit lowers the payment by $40.18 a month more than the price cut does, the price cut leaves $2,147 more equity at 7 years, and the credit is ahead overall from month 65.

By how many points you buy

How the cost, the saving, and the break-even move with the count.

The button shows exactly what your reader sees when they click the link. Paste the link where a link goes; it opens this table in a small window, always current as of the record, with the attribution and a link to the full page. Nothing to copy out, nothing to update later.

Cite and link.

The clean address, a citation generated from the record so it can never carry a stale review date, and an address for every section so you can point a reader at the exact table or method.

Link

https://consideratecapital.com/tools/mortgage-points-calculator

Citation

Considerate Capital, "Should You Buy Points? The Break-Even on a Rate Buydown," reviewed September 7, 2026, https://consideratecapital.com/tools/mortgage-points-calculator.

Link to a section

• The calculator https://consideratecapital.com/tools/mortgage-points-calculator#calculator
• The facts https://consideratecapital.com/tools/mortgage-points-calculator#facts
• By how many points https://consideratecapital.com/tools/mortgage-points-calculator#key-numbers
• How the count works https://consideratecapital.com/tools/mortgage-points-calculator#how-it-works
• Methodology https://consideratecapital.com/tools/mortgage-points-calculator#methodology
• Revision history https://consideratecapital.com/tools/mortgage-points-calculator#revision-history