US Mortgage Refinance Breakeven & Discount Points Optimizer

Calculate your exact breakeven horizon in months, model discount point buydowns, and project net savings over 5, 10, and 30 years.

US refinance and discount points: break-even calculation

The break-even point of a US refinance is closing costs plus the cost of points, divided by the drop in monthly payment. By default, 1.5 points ($5,700) and $4,500 of fees to bring the rate from 5.75% to 5.375% are recovered in 24 months. The points alone take about 64 months to pay for themselves, so they only pay off if you keep the loan more than 5 years.

How it is calculated

One point costs 1% of the new loan amount and cuts the rate by 0.25 percentage point by default, a value you can set to match your lender's pricing (1% rate floor). Both payments follow the amortising loan formula over the chosen term (15, 20 or 30 years): M = C × i × (1 + i)n ÷ ((1 + i)n − 1), where i is the annual rate divided by 12. Break-even = (fixed costs + cost of points) ÷ monthly saving. Net gain after 5 years, 10 years or the full term = monthly saving × number of months − total cost.

Default example

$380,000 at 7.125% over 30 years costs $2,560.13 a month. An offer at 5.75% with 1.5 points means $5,700 of points, an effective rate of 5.375% and a new payment of $2,127.89, a saving of $432.24. With $4,500 of fees, the $10,200 total cost is recovered in 24 months. Net gain: $15,734 after 5 years, $41,669 after 10 years and $145,406 over 30 years. Without points, the saving drops to $342.55 a month, but break-even takes only 14 months and the 5-year gain is slightly higher ($16,053). The extra $89.69 a month bought by the points repays their $5,700 in 63.6 months.

Limits of the tool

  • The current payment is recalculated over the new loan's term, not your actual remaining term.
  • If you roll the fees into the loan, the points also apply to the financed fees: the new loan is (balance + fixed fees) ÷ (1 − points in %).
  • The rate cut per point (0.25 by default) is an input: each lender publishes its own pricing, so enter yours.
  • Gains are neither discounted nor after tax.

For a refinance without points, using your remaining term and a possible extension, the general refinance calculator fits better. The result is an estimate and does not replace the lender's written offer or advice from an adviser or CPA.

Sources and dates: under IRS Publication 936 (2025 edition, for 2025 returns), points paid to refinance a mortgage are generally not deductible in full in the year paid; they are deducted over the life of the loan, except the part related to improving your main home (checked on 14/10/2026).

Frequently Asked Questions

How much does a discount point cost on a US mortgage?

One point costs 1% of the loan amount: on $380,000, 1.5 points cost $5,700. By default the tool assumes each point lowers the rate by 0.25 percentage point, and you can change it: enter your lender's actual pricing, which depends on the market and your profile.

Are discount points worth it?

Divide the cost of the points by the extra monthly saving they bring. In the default example, $5,700 ÷ $89.69 gives about 64 months. If you expect to sell or refinance within 5 years, the no-points offer earns more ($16,053 net gain after 5 years versus $15,734).

Are refinance points tax deductible?

Under IRS Publication 936 (2025 edition), refinance points are generally deducted over the life of the loan, not in full in the year paid. For $5,700 of points on a 30-year loan, that is $190 a year if you itemize. The part related to improving your main home can be deducted in the year paid.

Should I roll closing costs into the new loan?

It saves you paying $10,200 upfront, but the balance rises to $390,355, because the 1.5 points then also apply to the financed fees ($5,855 instead of $5,700), and those costs accrue interest. In the example, the payment rises to $2,185.88, the saving drops to $374.25 a month and break-even moves from 24 to 28 months.

Is this tool really free?

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