Buy Points vs Increase Down Payment
Decide whether it makes more sense to buy discount points or put more money toward your down payment. Compare monthly payments, upfront costs, and total interest over the time you expect to stay in the home.
Buy points versus increase down payment calculator
Monthly payments
Upfront & horizon costs
- Upfront points cost
- $4,000.00
- Total paid over 7 years (A)
- $210,880.98
- Total paid over 7 years (B)
- $210,251.11
Interest paid
- Interest over horizon (A)
- $167,015.34
- Interest over horizon (B)
- $172,299.44
Breakeven
Buying points pays back in about 100 months.
Recommendation
Increasing down payment likely wins for your horizon.
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Total cost over time
Track how much you pay over your horizon when buying points versus adding to the down payment.
How to use the Buy Points vs. Increase Down Payment Calculator
Compare the upfront cost of mortgage discount points with the benefit of boosting your down payment so you can maximize long-term savings.
- Enter the purchase price, base interest rate, and available cash for closing.
- Specify how many points you are considering and the per-point cost charged by the lender.
- Adjust the down payment slider to see how lower principal affects the monthly payment.
- Review the break-even timeline and choose the mix that aligns with your time horizon.
Buy Points vs. Increase Down Payment Calculator key terms
Knowing how each field influences the results keeps the math grounded in reality.
Discount point
A fee equal to 1% of the loan amount that typically lowers the rate by about 0.25%. Paid upfront at closing.
Loan-to-value (LTV)
The ratio of loan amount to property value. A higher down payment reduces LTV and may eliminate mortgage insurance.
Break-even period
The number of months it takes for monthly savings to repay the upfront point cost.
Buy Points vs. Increase Down Payment Calculator planning ideas
Try running a few “what if” scenarios to translate the numbers into real-world decisions.
Short stay versus forever home
If you plan to move or refinance within a few years, the break-even math may favor a larger down payment instead of points.
Mortgage insurance avoidance
Model 20% down versus 15% down with points to see whether eliminating PMI is more valuable than buying the rate lower.
Cash-on-hand constraints
Balance closing costs with emergency savings so you do not overextend yourself at the closing table.
Comparing cash deployment strategies
| Strategy | Upfront cost | Monthly payment | 5-year savings |
|---|---|---|---|
| Buy 2 points | $6,000 | $2,412 | $7,980 |
| Increase down payment by 5% | $25,000 | $2,365 | $6,300 |
| Split cash between both | $15,500 | $2,338 | $8,250 |
Frequently asked questions
Are points tax deductible?
Discount points may be deductible in the year paid on a primary residence, but always consult a tax professional. The calculator shows the cash impact before any tax benefits.
Can I combine points with lender credits?
Yes. Some borrowers use credits to cover closing costs while still buying a fraction of a point to reduce the rate. Model a few combinations to see which one stretches your dollars.