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The CFPB 180,000 toolkit pair
Use the CFPB Home Loan Toolkit pair: 180,000 borrowed, 5% with zero points, and 4.875% after paying 0.375 points. Keep the term at 30 years. Point cost is 0.375 percent of 180,000, which is 675.
Loan amount: 25% lower
Change loan amount to 135,000 while keeping the other example values the same.
Loan amount: 25% higher
Change loan amount to 225,000 while keeping the other example values the same.
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Quick answer
What does the Mortgage points break-even calculate?
How many months of lower payments recover the cash you pay for discount points? This calculator uses loan amount, rate without points, rate with points, discount points paid, and loan term to estimate months to recover discount points immediately in your browser.
With the values currently entered, the result is 62 months — to recover the cost of the points. It also shows cost of points, payment without points, payment with points, monthly saving, and exact break-even.
How to use the Mortgage points break-even
- Replace the example values with your own numbers.
- Review the result and supporting figures as they update automatically.
- Check the formula and assumptions before using the estimate for a decision.
Inputs used
- Loan amount
- Rate without points — entered in %
- Rate with points — entered in %
- Discount points paid — entered in points
- Loan term — entered in years
Mortgage points break-even formula
Point cost = points × 1% × loan amount. Monthly saving = payment at the no-point rate − payment at the lower rate. Break-even months = point cost ÷ monthly saving.
Assumptions
- CFPB defines one discount point as 1 percent of the loan amount. The rate cut per point is whatever the two rates you type already show.
- Break-even is the CFPB rough estimate: point cost divided by the monthly principal-and-interest saving. Tax effects and later refinances are excluded.
Verify the inputs
Authoritative sources
These sources explain the definitions, factors, or rules behind this tool. Their geographic scope is shown because an official source for one country is not automatically valid somewhere else.
Definitions and disclosure rules for APR, mortgages, credit cards, and consumer loans.
Lender credits and discount pointsUS Consumer Financial Protection BureauScope: US mortgage disclosures; method is generalOne discount point equals 1 percent of the loan amount. The rate reduction for each point is set by the lender and the market, not by a fixed rule.
Trends in discount points amid rising interest ratesUS Consumer Financial Protection BureauScope: US mortgage market research; break-even method is generalMost borrowers benefit from points only after the break-even period, roughly the cost of the points divided by the monthly payment saving.
Sources do not endorse Calculum. Check the source date, scope, and your own documents before making a financial, tax, insurance, or reporting decision.
Practical guide
Mortgage points break-even example and edge cases
Discount points are cash at closing in exchange for a lower rate. CFPB defines one point as 1 percent of the loan. Break-even is that cash divided by the monthly payment saving.
Example: The CFPB 180,000 toolkit pair
Use the CFPB Home Loan Toolkit pair: 180,000 borrowed, 5% with zero points, and 4.875% after paying 0.375 points. Keep the term at 30 years. Point cost is 0.375 percent of 180,000, which is 675.
- Loan amount
- 180,000
- Rate without points
- 5 %
- Rate with points
- 4.875 %
- Discount points paid
- 0.375 points
- Loan term
- 30 years
Calculated result50 monthsto recover the cost of the points
If you sell or refinance before that month count, the points can still cost you. The refinance break-even calculator is the closer tool when you already know both monthly payments.
Example results use the default display profile. The calculator above follows your selected country and units.
How to read the result
- Read the month count first. It is point cost divided by the monthly principal-and-interest saving.
- CFPB is explicit that the rate cut per point is not fixed. Type both rates from the same lender’s Loan Estimate. Do not invent a 0.25 percent rule.
Edge cases worth checking
The two rates come from different lenders
Stop and get a matching pair. A cheaper lender can look expensive if you only compare its points quote with another bank’s no-point rate.
You expect to move in a few years
If the stay is shorter than the break-even, skip the points or look at lender credits instead. CFPB’s table shows that trade the other way.
What changes the result most
Loan amount
Use a current amount for loan amount. Include fees or recurring costs that belong in the same figure.
Rate without points
Test a lower and higher rate without points. A small percentage change can move the final result more than expected.
Rate with points
Test a lower and higher rate with points. A small percentage change can move the final result more than expected.
Try a different scenario
Small changes show whether the answer is stable or sensitive.
Loan amount: 25% lower
135,00050 monthsto recover the cost of the points
Loan amount: 25% higher
225,00050 monthsto recover the cost of the points
Rate without points: 25% higher
6 %6 monthsto recover the cost of the points
Common mistakes
Check loan amount
CFPB defines one discount point as 1 percent of the loan amount. The rate cut per point is whatever the two rates you type already show. Make sure this matches the number you enter.
Keep loan term consistent
Break-even is the CFPB rough estimate: point cost divided by the monthly principal-and-interest saving. Tax effects and later refinances are excluded. Use the same units and time period throughout the calculation.
Do not rely on one mortgage points break-even scenario
Run a cautious case and an optimistic case. The range is often more useful than one exact-looking number.
Use this result well
How many months of lower payments recover the cash you pay for discount points?
It cannot replace a lender quote, lease, survey, or purchase contract.