What this calculator settles
Lenders quote loans as a rate, which makes options look comparable when they are not. A lower rate bought with points is a trade — money now against money later — and whether it is a good trade depends entirely on how long you keep the loan. This page lays three quotes side by side, prices each one over the holding period you expect, and reports the month at which paying for a lower rate starts to pay you back.
The cost figure it uses is upfront cost plus interest actually paid over your horizon, not the lifetime interest on the amortization schedule. That matters because almost nobody holds a thirty-year loan for thirty years, and ranking loans by total lifetime interest will reliably point you at the wrong one.
Reading the example this page loads with
The defaults describe three quotes on the same $300,000 loan, held five years. These figures are illustrative — a teaching example, not market data for any particular lender.
| Option | Rate · points · fees |
|---|
| A | 6.75% · 0 pts · $2,500 |
| B | 6.375% · 1 pt · $2,500 |
| C | 6.0% · 2 pts · $2,500 |
The payments are $1,946, $1,872 and $1,799 respectively. Option A costs $2,500 upfront; B costs $5,500 and C $8,500, since each point is 1% of the loan. Over five years, A costs $100,875 all in, B costs $98,222, and C costs $95,582. On a five-year hold, C wins by $5,293 over A.
But the breakeven figures tell you how fragile that is. Paying for B takes 40.4 months to recover; paying for C takes 40.8 months. Sell or refinance before roughly three and a half years and the cheapest-looking option becomes the most expensive one.
Why both breakevens land in the same place
B and C recovering at 40.4 and 40.8 months is not a coincidence — it is what consistent pricing looks like. The lender is charging about the same amount per quarter-point of rate reduction in both steps, so neither is a better bargain than the other and the only real decision is how many of them to buy.
That makes the comparison a useful diagnostic. When one option's breakeven lands well short of the others, that option is priced generously and is worth taking. When one lands far beyond, you are overpaying for that increment. Enter real quotes rather than the defaults and the pattern in the breakeven column will tell you more about the pricing than the rate column does.
Pick the horizon honestly
Everything above turns on the five-year figure, and it is the input most people set wrong. The right number is not the loan term and not how long you expect to own the property — it is how long you expect to keep this loan. A refinance ends it just as surely as a sale, so if rates are elevated and you expect to refinance within a couple of years, your horizon is two years regardless of how long you intend to stay.
Set the horizon to 2 in this example and the ranking inverts: A becomes the cheapest option because neither B nor C has had time to earn back its points. That inversion is the single most useful thing this page does, and it is the reason to resist buying down a rate when you genuinely expect to refinance out of it.
What points are, and what they are not
A point is 1% of the loan amount paid at closing in exchange for a lower rate — here $3,000 per point on a $300,000 loan. It is a prepayment of interest rather than a fee for service, which is why it earns a return in the form of a smaller payment and why that return takes time to materialize.
Two things to keep straight. Points are not the same as lender fees, which buy you nothing and should simply be compared and negotiated; the page keeps them in separate fields for that reason. And money spent on points is money not available for the down payment, so on a purchase the comparison is not just points against rate but points against a larger down payment, a smaller loan, or avoiding mortgage insurance — none of which this page models.
Comparing loans of different lengths
The term field is set per option, so you can test a fifteen-year loan against a thirty. Read that comparison carefully, because the shorter loan will show a much higher monthly payment and much lower interest over the horizon, and neither figure alone answers the question. The shorter loan is partly a forced savings plan — a good deal of that higher payment is principal, which is not a cost but a transfer into your own equity.
The honest comparison of a fifteen against a thirty is between the interest figures and the flexibility, not between the payments. A thirty-year loan paid at a fifteen-year rate of principal reaches a similar place while leaving you the option to stop, and the fifteen typically comes with a lower rate as compensation for giving that option up.
What this page does not cover
Adjustable rates are not modeled — every option here amortizes at a fixed rate for its full term, so an adjustable-rate quote can only be compared across the period before its first adjustment, and the page cannot tell you what happens afterward. Prepayment penalties, which appear on some investor loans, are also absent and would change the cost of an early exit substantially. Nor does it model mortgage insurance, escrow, or any rate dependence on the down payment.
If you are financing a rental rather than a home, the loan is only half the question — run the property through the single-family rental analyzer to see whether the payment the winning option produces is one the rent can actually carry, and the DSCR loan qualifier to see whether a lender would write it at all. Our article on cash versus financing covers the prior question of whether to borrow in the first place.