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Mortgage points calculator
Discount points let you pay cash at closing to buy a lower interest rate for the life of the loan. Whether that trade pays off depends entirely on how long you keep the mortgage.
Do discount points make sense for you?
Each point costs 1% of the loan and shaves roughly a quarter-point off the rate. You're essentially prepaying interest to lower every future payment.
The deciding number is the break-even month — how long the monthly savings take to repay the up-front cost. Stay past it and you profit; leave early and you don't.
- Cost: one point equals 1% of the loan — $2,850 on a $285,000 Michigan mortgage.
- Benefit: a point usually trims about 0.25% off the rate, lowering every payment.
- Break-even: point cost divided by monthly savings tells you the payoff month.
- Cash trade-off: money spent on points is money not spent on your down payment.
See how the lower rate reshapes your payment in the payment estimator, then weigh points against a future refinance using the refinance break-even tool. It's also worth watching where Michigan mortgage rates sit before committing cash to a buydown.
Frequently asked questions
What is one mortgage point worth?
One discount point costs 1% of your loan amount and typically lowers your rate by about 0.25%. On a $285,000 Michigan mortgage, one point is $2,850 paid at closing. The exact rate reduction varies by lender and day, so always compare the quoted rate with and without points.
How do I know if buying points is worth it?
It comes down to the break-even point: divide what the points cost by the monthly payment savings. If that lands at, say, 60 months, you need to keep the loan past five years to come out ahead. Planning to sell or refinance sooner means the points lose money.
Are mortgage points tax deductible in Michigan?
Points paid to buy down the rate on a home purchase are generally deductible in the year you pay them if you itemize, subject to IRS rules. On a refinance, the deduction is usually spread across the loan term instead. Confirm your specific situation with a tax professional.