The break-even test
Break-even months = cost of points ÷ monthly payment savings
Buy 2 points on a $400,000 loan for $8,000 to drop the rate from 6.75% to 6.0%, saving about $190/month, and you break even in roughly 42 months. Keep the loan past that and the points were a good deal; refinance or sell before it and you lost money.
What the calculator shows
- Monthly payment savings from the lower rate
- Up-front cost of the points
- Break-even point in months and years
- Lifetime net benefit — total interest saved minus the cost of the points, if you hold the loan to term
- Cost per 0.25% of rate bought down, so you can judge the lender’s pricing
When points make sense
- You’re certain this is a long-term home and a long-term loan
- Rates are already low, so a future refinance is unlikely
- You have cash beyond your down payment, closing costs, and reserves
- You can’t or don’t want to put more down (points and a bigger down payment compete for the same dollars — compare both)
When to skip them
- Any chance of moving or refinancing within ~4–5 years
- The cash would leave you without an emergency fund
- A lender credit (negative points) is available and you’d rather take a slightly higher rate with lower closing costs
If you’re refinancing, fold the points into the refinance break-even calculator so you’re measuring the whole deal at once.