Mortgage Points Buy-Down Calculator
The breakeven decides everything, not the rate on the brochure
Mortgage Points Buy-Down Calculator
Cost of points
0
paid at closing
The breakeven is the whole decision
Buying points only pays off if you stay in the loan (without refinancing or selling) long enough for the monthly savings to recover the upfront cost — if you might move or refinance sooner, the points are a straightforward loss.
Rate cuts per point aren't perfectly linear
Lenders typically offer diminishing returns on additional points — the first point often buys more rate reduction than the second or third, so check the lender's actual point-by-point pricing rather than assuming a flat rate per point.
Points are usually tax-deductible in the year paid
For a purchase-money mortgage on your primary residence, points are generally deductible as prepaid interest in the year paid (subject to the mortgage interest deduction's own limits) — a real, if secondary, factor in the true breakeven math.
Monthly payment savings and breakeven use standard EMI amortization comparing the base rate to the bought-down rate on the same loan amount and an assumed 30-year term. Real lender point pricing is rarely perfectly linear per point (diminishing returns are common) — get the lender's actual rate sheet for a precise breakeven rather than assuming a flat per-point reduction. The tax deductibility of points (as prepaid interest) isn't factored into the breakeven shown here, and would improve the case for buying points if you itemize deductions. Not financial advice.
Frequently asked questions
What is EMI and how is it calculated?
EMI (Equated Monthly Installment) is the fixed monthly payment that repays a loan over its tenure, made up of principal and interest combined. It's calculated from the loan amount, interest rate, and tenure using a standard amortization formula -- the same one this calculator uses, so you can see the exact monthly figure and how much of each payment goes to interest versus principal.Read more: Credit Card Payoff Calculator: What Minimum Payments Really Cost
Does prepaying a loan actually save money?
Yes, almost always -- a prepayment reduces the outstanding principal, which reduces the interest charged on every remaining installment. The earlier in the loan you prepay, the more you save, since interest is front-loaded in most amortization schedules. Check for prepayment penalties with your lender first.Read more: Auto Loan Calculator: The Real Monthly Cost of Financing a Car
What's the difference between flat rate and reducing balance interest?
Flat-rate interest is charged on the full original loan amount for the entire tenure, even as you pay it down -- reducing-balance interest is charged only on what's still outstanding, so it falls every month as you repay. A flat rate quoted at the same percentage as a reducing-balance rate is effectively much more expensive; always confirm which method a lender is using.Read more: Payoff vs Invest Calculator: Extra Cash, Best Use
Will improving my credit score lower my loan interest rate?
Usually, yes. Lenders price risk into the interest rate they offer, and a higher credit score signals lower risk, which typically qualifies you for better rates. It varies by lender and loan type, but it's one of the few loan-cost factors largely within your control before you apply.Read more: Credit Card Payoff Calculator: What Minimum Payments Really Cost
Estimates only, not financial advice. See our Disclaimer.
