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Points are a bet on tenure. Know the breakeven before you place it.
Discount points trade upfront cash for a lower rate — one point costs 1% of the loan and typically cuts the rate 0.25%. Whether that trade wins depends on one thing: how long you keep the loan. This calculator prices it exactly — upfront cost, monthly savings, breakeven month, and net savings over your expected tenure — including the refinance caveat that resets the clock.
Buyers staring at a loan estimate use it in the lender's parking lot: the points line item becomes a breakeven month, and the verdict changes with honest tenure — keep the loan five years or less and the answer is usually no.
Only if you keep the loan past breakeven. Example: $300,000 for 30 years, 1 point ($3,000) drops 7% to 6.75%, saving $50.11/month — breakeven at 60 months. Keep the loan 10 years and you net $3,014; sell at year 4 and the points cost you money. Falling-rate environments make points worse, because a refinance resets the clock before breakeven.
One point costs 1% of the loan amount, paid at closing — $3,000 on a $300,000 loan — and typically reduces the rate by 0.25%, though the exact cut varies by lender and market (always get the quote in writing). Two points cost 2% and cut roughly 0.5%, with diminishing returns past that.
Run both. A bigger down payment reduces the loan balance (interest on less principal) and can eliminate PMI at 20% down — PMI removal often beats the rate cut. If you are already past 20% down, compare the point's breakeven against the down payment's interest savings over the same tenure; this calculator gives you the points side of that comparison.