What this mortgage points comparison measures
One discount point is modeled as 1% of the entered mortgage amount, paid in cash at closing. The calculator builds two level-payment, fixed-rate amortization schedules for the same principal and term: one at the rate without points and one at the rate offered with points.
Simple payment break-even
The simple break-even divides the cash cost of the points by the monthly principal-and-interest payment savings. It is easy to understand, but it ignores that the two rates also produce different remaining principal balances.
Balance-aware break-even
The balance-aware comparison adds cumulative principal-and-interest payments to the remaining loan balance for each option, then adds the point cost to the points option. Its break-even month is the first month when the points option is no more costly on that payoff-equivalent basis. This is why its date can differ from the simple payment break-even.
Your time horizon matters
Points exchange more cash at closing for a lower rate over time. If you sell, pay off, or refinance before break-even, the lower rate may not recover the upfront point cost. The Consumer Financial Protection Bureau recommends comparing options over short, long, and most-likely periods because the rate reduction per point depends on the lender, loan, and market.
Compare real loan offers, not rate assumptions
Enter the same loan amount and term from two dated lender scenarios. Keep other fees separate: an origination charge expressed as a percentage is not automatically a discount point, and lender credits make the opposite tradeoff by reducing upfront costs for a higher rate. Review the CFPB explanation of lender credits and discount points, and compare official Loan Estimates and APRs.
Important exclusions
The model excludes taxes, insurance, mortgage insurance, escrow, other closing costs, seller or lender contributions, tax treatment, investment return on cash, daily interest, irregular payments, adjustable rates, and prepayment charges. Use the Mortgage Amortization Calculator for a detailed schedule and the Mortgage Refinance Calculator when replacing an existing loan.
This is an educational fixed-rate scenario, not a loan offer, rate quote, mortgage recommendation, approval, tax conclusion, or financial, legal, lending, or accounting advice. Verify the official Loan Estimate, point cost, rate lock, APR, cash to close, term, and all product conditions.