Points Break-Even
Find how many months lower payments take to earn back the cost of points, and where you stand when you expect to move or refinance.
Points break-even
Months to earn back the points
About 5 years 2 months of lower payments.
| Cost of points | $8,000 |
|---|---|
| Monthly savings | $131 |
| Lower balance after 7 years | $3,061 |
| Net gain after 7 years | $6,049 |
An indicative figure for planning. Not a lender quote and not an offer of credit. Sidney Manzo, CA DRE #01108914, licensed in California.
RE/MAX Dream Properties (ASLG Inc), CA DRE #02142193
How this works
What the points buy
One point costs 1% of the loan amount. The tool compares principal and interest at the rate with no points and at the lower rate with points.
Break-even is the cost of the points divided by the monthly savings. The net figure adds the payment savings over the years you keep the loan and the lower balance at that point, then subtracts the cost.
If you expect to sell or refinance before the break-even month, the points may cost more than they save.
Questions
How this estimate works
What is a discount point?
An upfront fee paid to the lender, usually quoted as a percent of the loan, in exchange for a lower interest rate.
How many points are typical?
It varies by lender and by day. Compare the options on your loan estimate rather than a rule of thumb.
Why include the lower balance?
At a lower rate more of each payment goes to principal, so the balance is lower when you sell or refinance. That is part of what the points buy.