Compare a zero-point fixed-rate mortgage with a discount-points quote. See the upfront point cost, monthly principal-and-interest savings, two break-even measures, and estimated borrowing-cost savings when you expect to sell, pay off, or refinance.
Use quotes for the same lender, loan type, amount, term, lock period, and features. Enter the note interest rate—not APR.
Cash-flow uses payment savings. Interest-cost break-even counts cumulative interest saved and treats principal as equity, not an expense.
Net savings = zero-points cumulative interest and lender-controlled costs minus points-option cumulative interest, points, and lender-controlled costs. Positive means the points option costs less.
| Timeframe | Zero-points interest | Points-option interest | Interest saved | Net savings after upfront difference |
|---|---|---|---|---|
| Calculate to build the comparison. | ||||
Calculate to show the formulas with your inputs.
For a $400,000, 30-year fixed mortgage, 1.5 points cost $6,000. If the zero-point rate is 6.75% and the points rate is 6.25%, the principal-and-interest payment falls by about $131 per month. With equal other lender costs, simple cash-flow break-even is about 46 months.
The interest-cost method separately amortizes both options and finds the first month when cumulative interest savings recover the $6,000 upfront difference. This can differ from cash-flow break-even because monthly principal is equity rather than a borrowing expense.
Compare the same loan amount, term, fixed-rate product, features, lock period, and lender when possible. Rates can move daily, so quotes from different times can make points look better or worse for reasons unrelated to the points.
Discount points appear in Origination Charges on page 2, Section A. One point equals 1% of the loan amount. The CFPB Loan Estimate explainer shows where to find the rate, payment, points, and lender credits.
The amount of rate reduction per point depends on the lender, loan, and market. Enter the actual offered rate. The CFPB points and credits guide explains this tradeoff and recommends comparing several realistic timeframes.
Points only have time to pay back while this mortgage remains in place. Test the earliest plausible sale, refinance, or payoff—not just the date you hope to remain in the property.
Include origination charges, required lender-selected services, and lender credits consistently. Exclude property taxes, homeowners insurance, prepaid interest, and escrow funding when they are the same or merely timing differences. CFPB guidance recommends focusing on costs lenders control.
Cash-flow break-even is intuitive, but principal is not a borrowing cost. The interest-cost result and timeline table compare interest plus the incremental upfront charges, while the balances show the equity difference.
Review scope: point-cost logic, fixed-rate amortization, cash-flow and interest-cost break-even, validation, accessibility, and representative calculation tests. The reviewer is a technical calculation reviewer, not a lender, mortgage broker, tax professional, or financial adviser.
The scheduled monthly principal-and-interest payment is P × r(1+r)n ÷ ((1+r)n − 1), where P is principal, r is the monthly note rate, and n is the number of monthly payments. A zero-rate loan uses P ÷ n. Each option is amortized month by month; final payments are capped at the remaining principal and interest.
Cash-flow break-even is the first whole month in which cumulative scheduled payment savings equal or exceed the extra upfront cost. Interest-cost break-even is the first month in which cumulative interest savings equal or exceed that extra upfront cost. Point cost equals loan amount × points ÷ 100. Other cost difference equals points-option lender-controlled costs minus zero-point lender-controlled costs.
Assumptions: both options have the same principal, term, fixed rate, payment frequency, loan type, and features; points are paid in cash and are not financed; payments begin one month after closing; payments are made on time; and no extra principal is paid. Excluded: taxes, homeowners insurance, mortgage insurance, escrow timing, prepaid interest, opportunity cost of upfront cash, inflation, tax deductions, changing rates, future refinance costs, and eligibility or underwriting.
Educational estimate only. This calculator does not recommend a mortgage or determine whether points are affordable, deductible, or permitted. Confirm the rate, points, credits, cash to close, and five-year comparison on actual Loan Estimates. Consider a lender, qualified financial or tax professional, or HUD-approved housing counselor before committing funds.
One discount point costs 1% of the loan amount. On a $300,000 mortgage, one point is $3,000; 0.5 points is $1,500.
There is no fixed reduction. Pricing varies by lender, loan type, and market conditions, so use the actual rate quoted for each option.
Simple cash-flow break-even divides the points option’s extra upfront cost by its monthly P&I savings. The stricter result finds when cumulative interest savings recover that upfront difference.
Cash-flow break-even helps with budgeting. Interest-cost break-even treats principal as equity rather than expense. Review both against the earliest date you might sell, pay off, or refinance.
Use the note interest rate from page 1 of the Loan Estimate. APR includes points and certain fees, so it is not the input for the standard mortgage-payment formula used here.
No. Points buy a lower rate; they do not pay principal. This calculator assumes points are paid in cash rather than added to the loan amount.
Tax treatment depends on current law and the transaction. No tax benefit is included in these results; consult current official tax guidance or a qualified tax professional.
The modeled savings generally have not recovered the extra upfront cost. Use your earliest realistic exit date as the holding period to test that risk.
