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Discount points, and the years they need

Are discount points worth buying on this loan?

Points are a bet on staying put. You pay cash now for a lower rate later, and the deal is only good if you keep the loan long enough to collect. This works out where that line falls.

The loan

The buy-down

25 basis points is a quarter of a percent.

Break-even—When the monthly saving has repaid the cost of the points

—

Points cost—
Rate after buy-down—
Monthly saving—

The two payments

Without points—
With points—

Over the years you expect to hold it, buying these points leaves you——.

Net position after the holding period, by points bought

What this page assumes, and where it comes from

Every field starts from a placeholder you can change. The interest rate is a round starting number, not a quote, not an average, and not tied to a date — this site publishes no rates. The tax, insurance and mortgage-insurance rates are typical orders of magnitude, not your county’s or your insurer’s.
A point costs one percent of the loan amount and is assumed paid in cash at closing.
The rate reduction per point is an input, not a constant. Lenders price it differently and it moves daily; use the figure on the quote in front of you.
Break-even is the first month in which accumulated monthly savings cover the cost of the points.
The schedule is a level-payment amortisation: interest is the balance times the monthly rate, and everything else reduces principal. Extra payments are applied to principal in the month you set.
Every figure this calculator produces is an illustration. It uses the published rules for amortisation and mortgage insurance, and states its assumptions on the page, but it cannot know your credit profile, your county’s tax assessment or an insurer’s pricing. Treat the shape of the answer as useful and the exact dollar as a placeholder.

Questions this raises

What is a point?

One percent of the loan amount, paid at closing, in exchange for a lower interest rate for the life of the loan. On a $400,000 loan a point is $4,000.

How much rate does a point buy?

It varies by lender, by day and by loan. A quarter of a percent per point is a common rule of thumb and the default here, but you should use the number on the actual pricing sheet in front of you — the field is editable for exactly that reason.

What actually decides whether points are worth it?

How long you keep the loan. Points are a prepayment of interest; you get the money back slowly, in monthly instalments. If you sell or refinance before break-even you simply lost the cash. The median American mortgage does not run anywhere near thirty years.

Is there a better use for the same money?

Often. The same cash as a larger down payment can cut the loan, and above 80% loan-to-value it can also end PMI, which is a bigger and more certain saving than a quarter point.

Ask a person about this

A real lender would want these five things before it could say anything useful.

This form is a demonstration. Submitting it validates your entries and shows you the confirmation state. Nothing is saved, nothing is sent, and nobody will call you. See the README for the single seam where real delivery would be wired in.

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