Lowest total cost through your horizon
not applicableThe lender's rate without points is missing. Discount points do not buy a fixed rate reduction, so this cannot be estimated.
SwitchWize decision guide
Should your cash at closing buy points or a bigger down payment?
Most points calculators assume a point always buys about a quarter of a percent. It does not. The reduction depends on the lender, the loan, and the day, so this guide asks for the two rates your lender actually quoted and compares all three uses of the same cash over the years you expect to keep the loan.
What you can expect
- No login required
- No credit pull
- Assumptions shown
- Sources included
Quick answer
Points win only if you keep the loan past the month they pay for themselves, and only if the cash would not have done better elsewhere. Enter both quoted rates to see which is true for you.
If points
Best when the rate gap your lender quoted is wide and you are confident you will keep this loan for many years.
If bigger down payment
Best when the smaller loan clears a mortgage-insurance or pricing threshold, or when you simply want the lowest balance.
If keep the cash
Best when you may move or refinance soon, when your reserves are thin, or when the cash earns more than the mortgage costs.
Key number to watch
Ask your lender for two numbers on the same loan: the rate with no points, and the rate with points. A point does not buy a fixed rate cut, so this cannot be estimated for you.
Test your situation
See your result in dollars
Change any number below to match your situation. No login is required, and your entries stay in this browser.
$
The agreed price of the home.
$
What you planned to put down before deciding what to do with the extra cash.
$
The amount that could go to points, to the down payment, or stay in the bank.
How long before you sell or refinance
Most people keep a mortgage far less time than its full term. Be honest here, because it decides the answer.
From your lender's quote
Copy these from your Loan Estimate or written quote. Nothing leaves your browser.
%
From your Loan Estimate. Leave blank and this guide will not guess.
%
The rate the same lender quoted on the same loan once points are paid.
$
The dollar cost of the points in that quote. One point is one percent of the loan, not of the price.
Both quotes must be for the same term to be comparable.
Ask your lender for the rate with points and the rate without points on the same loan. Without both, any answer here would be a guess.
We are not showing a winner for this one
- • The lender's rate without points is missing. Discount points do not buy a fixed rate reduction, so this cannot be estimated.
- • The lender's rate with points is missing. Discount points do not buy a fixed rate reduction, so this cannot be estimated.
points
Not modeled
modeled after-tax interest
down-payment
Not modeled
modeled after-tax interest
keep-cash
Not modeled
modeled after-tax interest
Try a scenario
What could change this
Ask your lender for two numbers on the same loan: the rate with no points, and the rate with points. A point does not buy a fixed rate cut, so this cannot be estimated for you.
How certain: scenario dependent
What matters most
Side-by-side comparison
What the cash buys you
All three start from the same dollars at closing.
- Points
- A permanently lower interest rate
- Bigger down payment
- A smaller loan balance
- Keep the cash
- Money you can still reach
Effect on the monthly payment
- Points
- Lower, through the rate
- Bigger down payment
- Lower, through the balance
- Keep the cash
- Unchanged
Recoverable if you sell early
This is the difference people most often overlook.
- Points
- No. The upfront cost is spent
- Bigger down payment
- Yes, through your equity at sale
- Keep the cash
- Yes, immediately
Helps end mortgage insurance sooner
- Points
- No
- Bigger down payment
- Sometimes, if it crosses the threshold
- Keep the cash
- No
Value if rates fall and you refinance
- Points
- Largely lost
- Bigger down payment
- Kept as equity
- Keep the cash
- Kept in full
Who this tends to suit
- Points
- Long holders with a wide quoted rate gap
- Bigger down payment
- Buyers near a pricing or insurance threshold
- Keep the cash
- Thin reserves, or a likely move
What could go wrong
Buy discount points
- What needs to work
- You keep the loan past the month the points pay for themselves.
- Common problem
- Selling or refinancing before the break-even month, which wastes the entire upfront cost.
- What it could cost
- The full amount paid for points, with no rate benefit left to show for it.
- How to prepare
- Not reversible. Check the break-even month against your honest plans, not your hopes.
Bigger down payment
- What needs to work
- The smaller loan actually crosses a mortgage-insurance or lender pricing threshold, or you value the lower balance for its own sake.
- Common problem
- Adding cash that lands short of a threshold, which buys only a slightly smaller loan.
- What it could cost
- Illiquidity. The money is now in the house and reachable only by selling or borrowing.
- How to prepare
- Recoverable through equity, but slowly and with costs.
Keep the cash
- What needs to work
- The cash genuinely earns what you assumed, and you do not simply spend it.
- Common problem
- Assuming a return you never actually achieve, which quietly flatters this option.
- What it could cost
- Paying more mortgage interest for years while the cash sits earning less than you assumed.
- How to prepare
- Fully reversible. You can always put the money into the loan later.
A simple backup plan
Handle the threshold first, then the break-even
These are not strictly either-or. The cash can be split, and the order matters more than the split.
- 1Check whether a little more down payment ends mortgage insurance or moves you into better lender pricing. That is usually the highest-value dollar.
- 2Ask the lender for the rate with and without points on the same loan, and put both into the calculator above.
- 3Compare the break-even month with how long you honestly expect to keep the loan, not the full term.
- 4Keep a cash reserve you are comfortable with before committing anything to points.
- 5Put whatever is left toward whichever option the dollars actually favour.
Educational illustration only. The right amount depends on your needs and timing.
What to do next
Question 1
Would a little more down payment end mortgage insurance?
Yes: Do that first and re-run the numbers with the insurance removed.
No: Move on to the rate comparison.
Question 2
Do you have both quoted rates from the same lender on the same loan?
Yes: Enter them above for a dollar answer.
No: Ask for both before deciding. A point does not buy a fixed rate cut.
Question 3
Will you keep this loan past the break-even month shown?
Yes: Points are worth considering.
No: Keep the cash or increase the down payment instead.
Plain-text decision tree. Would a little more down payment end mortgage insurance? If yes, Do that first and re-run the numbers with the insurance removed. If no, Move on to the rate comparison. Do you have both quoted rates from the same lender on the same loan? If yes, Enter them above for a dollar answer. If no, Ask for both before deciding. A point does not buy a fixed rate cut. Will you keep this loan past the break-even month shown? If yes, Points are worth considering. If no, Keep the cash or increase the down payment instead.
When to check again
- Your lender reissues the Loan Estimate with different rates or point costs.
- Your expected time in the home changes.
- Rates drop far enough that refinancing becomes likely.
- Your cash reserves change materially before closing.
Methodology
Each option is amortised month by month to your horizon. The comparison adds the cash paid at closing, the interest and mortgage insurance paid along the way, and the loan balance still owed at the horizon, then subtracts what any cash kept out of the house would have grown to.
The two mortgage rates and the point cost have no defaults, because a point does not buy a fixed rate reduction and guessing one would produce a confident wrong answer. Everything else starts at a common illustrative value you can change.
- • Property taxes, insurance, and maintenance are excluded because they are the same across all three options.
- • No tax treatment of mortgage interest or points is modeled. Ask a tax professional about your own return.
- • The return on cash kept liquid is your assumption. It is not a rate SwitchWize observed or promises.
- • Lender pricing thresholds other than the mortgage-insurance boundary you enter are not modeled.
- • Rates quoted must be for the same loan amount and term, or the comparison is meaningless.
Reviewed quarterly, and whenever the underlying regulator guidance changes. Editorial conclusions do not depend on affiliate availability.
Sources
CFPB: lender credits and discount pointsChecked August 15, 2026 · high confidence
Source for the rule that a point buys no fixed rate reduction and that offers should be compared across holding periods.
CFPB: your Loan Estimate, explainedChecked August 15, 2026 · high confidence
Where each figure this calculator asks for appears on the form.
CFPB: when private mortgage insurance endsChecked August 15, 2026 · high confidence
Basis for the loan-to-value cancellation input.
Frequently asked questions
How much does one point lower my rate?
There is no fixed answer, which is exactly why this calculator asks for both quoted rates instead of assuming one. The Consumer Financial Protection Bureau states that the reduction depends on the lender, the loan type, and the market on the day you lock.
Is one point one percent of the price or the loan?
The loan. On a 500,000 home with 100,000 down, the loan is 400,000, so one point costs 4,000, not 5,000.
What is the break-even month?
The month in which the accumulated payment savings from the lower rate have finally repaid what you spent on points. Keep the loan past it and points paid off. Sell or refinance before it and they did not.
Why can keeping the cash win even when points break even in time?
Because the money would have been doing something else. In the worked example the points break even in month 62, well inside a seven-year horizon, and still lose, because the cash kept liquid grows by more than the points save.
Does a bigger down payment always beat points?
No. It tends to win when it crosses a mortgage-insurance or lender pricing threshold, and to lose when it lands just short of one, because then it only shrinks the loan slightly.
What if the seller is paying for the points?
Then they cost you nothing and break even immediately. Enter the amount someone else is paying in the advanced inputs so it is not counted against your cash.
Should I include property taxes and insurance?
No. They are identical whichever option you pick, so including them would add a large number to all three totals without changing which one wins.
Does this account for the mortgage interest deduction?
No. Whether it applies depends on your own return, and getting it wrong would move the answer. Treat the result as pre-tax and ask a tax professional about your situation.