APR Calculator · Practical guide
Is It Worth Paying Points to Lower Your Interest Rate?
Points pay off only if you keep the loan past the breakeven point — often four to six years.
At a glance
The Breakeven Answer
Paying points is worth it only if you keep the loan long enough for the monthly savings to repay the upfront cost. Example: on a $300,000, 30-year mortgage, paying $3,000 in points to drop the rate from 6.75% to 6.5% lowers the payment from $1,945.79 to $1,896.20 — a saving of $49.59 per month. Breakeven is $3,000 ÷ $49.59 ≈ 61 months, or about 5 years.
Interactive tool
APR Calculator
Enter your own values, then compare the result with the examples below.
APR Results
The Two Offers Side by Side
| Offer | Rate | Points Cost | Monthly | APR | 30-Year Total |
|---|---|---|---|---|---|
| No points | 6.75% | $0 | $1,945.79 | 6.750% | $700,486 |
| With points | 6.50% | $3,000 | $1,896.20 | 6.597% | $685,633 |
Keep the loan the full 30 years and the points save about $14,853. Sell or refinance before month 61 and you lose money on the deal.
When Points Do Not Pay
Skip points if you expect to move within a few years, if rates are likely to fall and trigger a refinance, or if the cash is better used for a larger down payment or emergency fund. The APR column shows the trade-off directly: points only reduced the effective rate to 6.597%, not the headline 6.5%.
Run Your Own Numbers
Enter each lender offer above with its rate and its points cost in the fees field. Compare the APRs and divide the fee by the monthly payment difference to find your personal breakeven month.
Frequently Asked Questions
How much does one point cost?
One discount point costs 1% of the loan amount. On a $300,000 mortgage, one point is $3,000, and it typically lowers the rate by about 0.25 percentage points.
Are mortgage points tax deductible?
Points paid on a home purchase mortgage are often deductible, sometimes fully in the year paid and sometimes over the loan's life. Confirm with a tax professional.
Do points show up in the APR?
Yes. Points are prepaid finance charges, so they count as fees in the APR calculation and raise the APR above the note rate.
Can you negotiate the cost of points?
The rate-for-points pricing is set by each lender's rate sheet, but you can shop multiple lenders and compare how much each charges for the same rate reduction.