Refinance Points vs No-Points Comparison Calculator
Should you pay discount points when refinancing? Our calculator helps you compare points vs. no-points options and find your break-even.
TL;DR: One discount point costs 1% of your loan ($3,500 on $350,000) and typically lowers your rate by 0.25%. Pay points only if you’ll keep the loan 7+ years—otherwise, the upfront cost exceeds the interest savings. Skip points if you might move or refinance within 5 years.
What Are Mortgage Points?
Discount points are upfront fees paid to lower your interest rate:
- 1 point = 1% of loan amount
- Typically lowers rate by 0.25%
- Example: $350,000 loan, 1 point = $3,500 for ~0.25% lower rate
Points vs. No Points Example
Loan: $350,000 cash-out refinance
| Option | Rate | Points Cost | Monthly Payment | Break-Even |
|---|---|---|---|---|
| No Points | 6.75% | $0 | $2,270 | - |
| 1 Point | 6.5% | $3,500 | $2,212 | ~62 months |
| 2 Points | 6.25% | $7,000 | $2,155 | ~61 months |
When Points Make Sense
Pay points if you’ll:
- Keep the loan 7+ years (past break-even)
- Value payment stability
- Have cash upfront
Skip points if you’ll:
- Move or refinance within 5 years
- Prefer lower upfront costs
- Invest that money elsewhere
Our Calculator Includes Points
When using our calculator:
- Enter your expected discount points (0-3)
- We factor points cost into closing costs
- Break-even analysis includes point recovery
- See total cost with/without points
Points for Cash-Out Refinance
Points are less common with cash-out refinancing because:
- Larger loan amounts = higher point costs
- Higher rates to begin with
- Many prioritize low closing costs
Rule of thumb: If you’ll keep the loan 10+ years, points may save money. Otherwise, skip them.
Frequently Asked Questions
Should I pay points on a cash-out refinance?
Usually no. Points increase your already-high closing costs ($3,500 per point on a $350,000 loan). Since cash-out refinances often have higher rates and borrowers may not keep them 10+ years, the break-even (5+ years) often exceeds the time you’ll have the loan.
How do I calculate if points are worth it?
Divide the point cost by the monthly savings: Break-Even (months) = Points Cost ÷ Monthly Savings. If 1 point costs $3,500 and saves $58/month, break-even is 60 months (5 years). Only pay points if you’ll keep the loan past the break-even.
Are mortgage points tax deductible?
Yes, mortgage points are generally tax deductible in the year you pay them for a purchase mortgage. For refinances, points must be deducted over the life of the loan. Consult a tax professional for your specific situation.