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Free Financial Calculator · Mortgage decision

Mortgage Points Break-Even Calculator

Compare a zero-point mortgage with a lower-rate quote that charges discount points. Terra shows how long it may take to recover the upfront cost — and what the choice looks like if you sell or refinance earlier.

Reviewed · Sep 14, 2026
What this does

Compares the upfront price of discount points with the payment savings and remaining mortgage balance over your expected holding period.

Have ready

Two comparable lender quotes: the same loan amount and term, one with zero points and one with the points/rate option you are considering.

Terra approachUse actual lender quotesShow the break-evenNo rate forecastHow Terra handles revenue →

Your mortgage quotes

Use the rate and points actually offered for the same loan. A point does not guarantee a fixed rate reduction; lenders price points differently.

One discount point equals 1% of the loan amount. Enter the actual points shown on your quote.
Include only costs that are higher because you chose this rate option. Do not include closing costs common to both quotes.
7 years
Try a short, likely, and long holding period. The CFPB specifically recommends comparing different possible timeframes when evaluating points.

Saved scenarios stay privately in this browser under My Terra. Nothing is saved unless you choose Save this scenario.

Use apples-to-apples quotes.Same lender or truly comparable lenders, same loan type, same principal, same term, and the same assumptions about other closing costs.
How the calculator works

The rate is lower. The question is whether you keep the loan long enough.

What is a discount point?

The CFPB and Freddie Mac define one point as 1% of the loan amount. On a $400,000 mortgage, one point costs $4,000. The interest-rate reduction associated with a point is not fixed, which is why Terra asks for the actual lower-rate quote rather than assuming “one point = 0.25%.”

What does Terra call break-even?

For each month, Terra compares cumulative principal-and-interest payments plus the remaining payoff balance. The points option also includes its added upfront cost. The first month when the points option's total modeled loan cost is no higher is the Terra break-even.

What is not modeled?

Property taxes, homeowners insurance, PMI, common closing costs, the investment return you might earn on the upfront cash, and any tax deduction for mortgage interest or points. Tax treatment depends on facts such as whether you itemize and whether the loan is a purchase or refinance.

Why does the expected holding period matter?

If you sell or refinance before the points are recovered, the lower rate may not have enough time to repay the upfront cost. CFPB guidance specifically recommends comparing points across several plausible time horizons.

Terra Takeaway

A lower mortgage rate is not automatically the cheaper mortgage. The relevant decision is whether the payment and balance savings are likely to recover the extra cash you pay at closing before this particular mortgage ends.

Primary sources

  1. Consumer Financial Protection Bureau — Points and lender credits. Explains that points trade higher upfront costs for a lower rate, that one point equals 1% of the loan amount, that the rate reduction varies, and that borrowers should compare total costs across likely holding periods. CFPB · Points and lender credits
  2. Consumer Financial Protection Bureau — Discount-point data spotlight. Notes that discount points are one-time fees paid for a lower rate and that there is no fixed relationship between one point and the size of the rate reduction. CFPB · Discount points
  3. Freddie Mac — What You Need to Know About Discount Points. Defines the basic tradeoff and reiterates that one point equals 1% of the loan amount while the rate reduction can vary. Freddie Mac · Discount points
  4. Internal Revenue Service — Publication 936. Explains the tax rules for home-mortgage interest and points, including different treatment that can apply to purchase and refinance points. IRS · Publication 936

Educational scenario only. This calculator models a fixed-rate mortgage using the assumptions entered. It is not a loan estimate, mortgage quote, tax calculation, approval decision or recommendation to buy points. Verify actual pricing, fees and tax treatment before closing.