Payment payback and economic break-even for mortgage points

Two break-even measures can answer different questions.

Payment-only payback

Divide the extra upfront cost by the monthly payment saving. This shortcut needs a positive saving. If payments are equal or higher and the upfront cost is positive, there is no payment-savings payback. A negative month count is not a useful answer.

Economic crossing

Our full comparison also includes the principal still owed at each month. Different rates amortize at different speeds, so this crossing need not equal the simple payback month. Optional discounting applies to all future payments and the terminal balance.

Lender credits can reverse the advantage

A higher-rate offer with a closing credit can begin cheaper and become more expensive later. Reporting only that it was ahead at month zero misses the reversal. Inspect the timeline and the result at your chosen holding period.

Use actual offers

One point is one percent of the loan amount, but its rate reduction is not fixed. Enter the offered rates rather than assuming a universal conversion.

Inspect the points comparison and monthly economic timeline.