Mortgage Points Calculator
Work out the cost of buying discount points, the lower payment after the rate drop, and the break-even time to judge if points are worth it.
Input Data
Results
At a glance:Discount points lower a mortgage rate for an upfront fee. Points cost = loan × points%; reduced rate = base rate − points × cut per point; payment without/with use standard amortisation; monthly saving = payment without − payment with; break-even months = points cost ÷ monthly saving.
Formula
Points cost = loan × points%.
Reduced rate = base rate − points × rate cut per point.
Break-even months = points cost ÷ (payment without − payment with).
$$\text{Points Cost} = \text{Loan} \times \dfrac{\text{Points}}{100}$$$$\text{Reduced Rate} = \text{Base Rate} - \text{Points} \times \text{Reduction per Point}$$How to Use
- Enter the loan amount and base rate.
- Enter the points, the rate cut per point and the term.
- Read the cost, reduced rate, payments, saving and break-even time.
FAQ
When does buying discount points pay off?
It pays off when you keep the mortgage longer than the break-even period, so the ongoing monthly savings recover the upfront cost and then keep saving. If you sell, refinance or pay off early before the break-even point, the points are usually a loss.
Is one point always a 0.25% rate cut?
No. '1 point = 1% of the loan' is a common convention, but the actual rate cut per point is set by the lender and may be higher or lower than 0.25%. This tool lets you enter the real cut so it matches your quote.
Are discount points used in Hong Kong mortgages?
Points are mainly a feature of US-style mortgages. Hong Kong mortgages are mostly floating (linked to Prime or HIBOR) and compete with cash rebates rather than points. This calculator is mainly for understanding the concept or assessing an overseas (e.g. US) fixed-rate mortgage.
How do discount points differ from a cash rebate, and which does Hong Kong use?
They work in opposite directions. Discount points mean you pay the lender an upfront fee (1 point = 1% of the loan) to lower your rate and monthly payment — 'pay now, save later', common in the US fixed-rate market. A Hong Kong cash rebate means the bank pays you a lump sum at drawdown to win the mortgage, but usually imposes a penalty period during which early repayment or refinancing claws back part of the rebate. The core difference: points are paid-first/saved-over-time, while a rebate is received-first but locks you in for a while. Hong Kong's mainstream is 'floating rate plus cash rebate', and discount points are rare — partly because local rates float, so buying a 'fixed' point is less meaningful. So this tool's points concept applies mostly to overseas (especially US) or fixed-rate mortgages; for a Hong Kong purchase you more often compare banks' 'rate plus rebate plus penalty period' packages — pair it with our mortgage and refinance calculators.
Beyond the break-even period, what else should I weigh before buying points?
The break-even months is the core yardstick — it tells you how many months of saving it takes to recover the upfront cost, so buying points makes sense if you clearly hold the loan longer than that. But also consider: (1) certainty of the holding period — the break-even assumes you keep paying past it; if you sell, relocate or refinance earlier, you lose the bet; (2) the opportunity cost of the cash — the points money is a one-off outlay that could instead be kept as an emergency fund, invested, or used to reduce the principal and lower the LTV; (3) reduce-principal vs points — putting the same cash into a bigger down payment may beat buying points and can even help meet the LTV cap; (4) tax treatment, where points may be deductible in some jurisdictions but generally not in Hong Kong; (5) the actual cut per point, which drives the real return. In short, points suit borrowers who are cash-rich, certain to hold long, and face a reasonable cut per point; if cash is tight or the horizon is uncertain, skip them.
Related Tools
References
Content review: Calculatorism Finance Team. Results are for reference only; please refer to the relevant authorities for the official figures.