Mortgage & Home Equity•Discount Points Breakeven Math
Mortgage Buydown & Points Calculator
Find out if paying upfront discount points to lower your rate saves money. Calculate your exact breakeven horizon using our free mortgage buydown calculator and mortgage points calculator.
Financial Recommendation
Buying 1.0 point is WORTH IT
Paying $3,500 upfront lowers your rate from 6.75% to 6.50%. You breakeven in 62 months (5.2 years) and save $1,280 net over your 7-year timeline.
Upfront Cost (At Closing)$3,500
Points: 1.00 pt ($3,500)
Monthly Payment Savings$56 / mo
New Payment: $2,216 (was $2,272)
Breakeven Timeline5.2 Years
Breakeven Month: Month 62
Holding Horizon Net Financial Impact
See total cumulative monthly payment savings minus your upfront discount points cost for different mortgage holding periods.
| Holding Horizon | Cumulative Monthly Savings | Upfront Points Cost | Net Gain / (Loss) |
|---|---|---|---|
| 3 Years (36 Months) | $2,016 | $3,500 | -$1,484 (Loss) |
| 5 Years (60 Months) | $3,360 | $3,500 | -$140 (Loss) |
| 7 Years (84 Months - Average US Life) | $4,704 | $3,500 | +$1,204 (Profit) |
| 10 Years (120 Months) | $6,720 | $3,500 | +$3,220 (Profit) |
| Full 30-Year Loan Term | $20,160 | $3,500 | +$16,660 (Profit) |
Frequently Asked Questions
Fact-checked guidance grounded in discount point breakeven mathematics.
What are mortgage discount points?▾
Mortgage discount points are upfront fees paid to your lender at closing to permanently lower your interest rate for the full 30-year life of the loan. One point costs 1% of your loan amount ($3,500 on a $350,000 mortgage) and typically reduces your interest rate by 0.25%.
What is a temporary 2-1 mortgage buydown?▾
A temporary 2-1 buydown reduces your interest rate by 2% in year 1 and 1% in year 2, before returning to the full note rate in year 3. Sellers or homebuilders often fund temporary buydowns as a concession to lower buyer payments during the initial transition period.
How do I calculate the breakeven point when buying mortgage points?▾
Your breakeven point in months is calculated as: Breakeven Month = Upfront Points Cost / Monthly Payment Savings. For example, spending $3,500 on a $350,000 loan to save $58/month requires 61 months (about 5.1 years) of keeping the mortgage to break even.
Is buying discount points worth it if I plan to refinance in 2-3 years?▾
No. If you sell the home or refinance into a lower market rate before reaching your calculated breakeven month, you forfeit the unrecouped portion of your upfront points, resulting in a net financial loss.
Formulas & Regulatory Assumptions:
- Discount Points Cost: Each discount point costs exactly 1% of the loan principal ($1,000 per $100,000 borrowed).
- Rate Reduction Ratio: Typically, 1 point reduces your rate by 0.25% (25 basis points). Lenders may offer varying trade-offs depending on market conditions.
- Breakeven Calculation: Breakeven Month =
Upfront Points Cost / Monthly Payment Savings. If you sell or refinance before reaching the breakeven month, buying points results in a net financial loss. - Tax Consideration: Discount points paid on a primary home mortgage are typically tax-deductible in the year paid (subject to IRS Schedule A rules). Consult a CPA for personal tax advice.