Mortgage Points on a Rental: Break-Even Calculator, Fees, Tax

The calculator

The loan in the boxes ($250,000, 30 years, 7.00% without points, one point for 6.75%) is an example of ours and is labelled so; it is not market data. We chose 7.00% because the 2025 median note rate of consumer-purpose 30-year conventional investor loans in HMDA was 6.999%, and $250,000 because the median loan that paid points was $235,000. What you must type from your own rate sheet is the second rate: the price of a point is set by the lender, the day and your file, and no public record states it (see the HMDA section below).

The calculator shows two break-even months. The first divides the cost of the points by the monthly payment saving. The second also counts that a lower rate pays down more principal each month: at the example 0.25 point of rate, you owe $640 less after 60 months than on the 7.00% loan, so a sale or refinance that pays the loan off leaves you ahead sooner (our arithmetic).

Break-even in months: what one point has to buy

The table prices one point ($2,500) on the example loan at three possible exchange rates between price and rate. Nobody publishes the right one; rate sheets differ by lender and by day. Read across to see how much the answer moves.

Break-even for one point on a $250,000, 30-year loan at 7.00% (our arithmetic; exchange rates are illustrations, not quotes)

The base payment is $1,663.26 a month. Because the saving scales with the amount of rate bought, two points at the same exchange rate break even within a month of one (our arithmetic): the point is a bet on the exchange rate and on how long you keep the loan, not on the size of the purchase.

If the loan ends early: net result by month

A rental loan rarely runs 30 years. A cash-out refinance after seasoning, a sale, a move to a DSCR loan or a refinance when rates fall each end it. The table gives the result of paying one point if the loan ends in the month shown: payments saved, plus the lower balance, minus the $2,500.

Net result of paying one point on a $250,000 loan if it ends in month N (our arithmetic, before tax; the after-tax figure assumes a 24% marginal tax rate)

The sign flips at the break-even month, so the practical test is one sentence: if you expect the loan to end before the month in the right-hand column of the first table, you are paying for savings you will not collect. If it ends early, a lender credit works the opposite way: you receive money now and pay a higher rate until the loan ends. HMDA shows credits are common on consumer-purpose investor loans (31,457 of 90,859, a median 0.170% of the loan, or $483), and 11,699 loans show both points and credits.

A second input is how long a lender will let you leave. In HMDA 2025, 7,147 of the 90,859 consumer-purpose 30-year conventional investor loans (7.87%) carry a prepayment penalty, with a term of 36 months on 2,815, 12 months on 1,969, 60 months on 1,388 and 24 months on 742; the median is 36 months. Business-purpose loans do not report the field, so the share on DSCR-type loans is not public in this file. If your loan has a penalty, your minimum life is the penalty term and the break-even question starts there.

Why an investor is quoted more: Fannie Mae's price adder

If the loan will be sold to Fannie Mae, the lender pays a Loan-Level Price Adjustment, a fee set as a percent of the loan by loan features. The matrix dated 09.30.2026 says the adjustments “are cumulative,” are based on the gross loan-to-value ratio, and for MBS deliveries “will be drafted from the lender’s account designated for that purpose.” The lender recovers it in the price or the rate it quotes you. The investment-property line is the same for a purchase, a limited cash-out refinance and a cash-out refinance, and it rises with loan-to-value.

Fannie Mae investment-property LLPA by loan-to-value, purchase loans (matrix dated 09.30.2026), with the cost on a $250,000 loan (our arithmetic)

The fee stacks with the credit-score adjustment. For a 740-759 score:

Credit-score LLPA plus investment-property LLPA, 740-759 score, on a $250,000 loan (matrix dated 09.30.2026; sums and dollars are our arithmetic)

Two readings. First, the borrower who is quoted “no points” on a Fannie Mae investor loan has not escaped this fee; it is in the rate. A lender credit on the same loan means the rate is higher still. Second, the investor line rises from 1.125 points of price at 60% loan-to-value or less to 3.375 at 75.01% to 80%, which is why the down payment matters so much to an investor (see Fannie Mae and Freddie Mac rules, the LLPA matrix and the 2025 HMDA record and how much down payment investors put down). The matrix does not publish how many points of price equal one point of rate. That page also sets the 2025 median investor rate premium beside the LLPA line; the 2025 rates by loan type are on investment property mortgage rates.

What investors paid in 2025: federal HMDA data

HMDA is the only public loan-level record of points. We recounted the national 2025 file (originated loans only, occupancy type 3 investment property, conventional, first lien, closed-end, not reverse, one to four units). Of 486,530 such loans, 102,257 were flagged as not made primarily for a business or commercial purpose and 384,257 as made primarily for one. The reason the split matters is in the rule, not the lender: Regulation C requires discount points only “For covered loans subject to the disclosure requirements in Regulation Z, 12 CFR 1026.19(f)”, and its official comment says the requirement does not apply to “loans or lines of credit made primarily for business or commercial purposes.” Regulation Z itself exempts “An extension of credit primarily for a business, commercial or agricultural purpose” (12 CFR 1026.3(a)(1)).

Points and credits on 30-year conventional first-lien investor loans, HMDA 2025 (our recount)

Among the 50,556 loans that paid points, the median was 1.049% of the loan ($2,412 on a median loan of $235,000), with a middle half of 0.478% to 1.979% of the loan. Among the 31,457 with credits the median was 0.170% ($483). Both match the closing-cost table on our investment property mortgage rates page to within 0.1% in the loan count (that page shows 90,911 loans and 50,577 with points; we did not reproduce its last 52 and 21 loans, and the medians agree).

Does paying more points show up as a lower rate?

For purchase loans in this group (59,966), we bucketed by points paid as a share of the loan:

Median note rate of 30-year consumer-purpose investor purchase loans by points paid, HMDA 2025 (our arithmetic)

The median rate does not fall as points rise. The comparison is confounded: borrowers with weaker files may buy more points to reach a rate that is still higher, lender mix differs, and the file has no credit score. Holding loan-to-value constant helps a little. The groups below are purchase loans in each band; points paid are grouped as none, under 2% and 2% or more.

Median note rate by loan-to-value band and points paid, HMDA 2025 purchase loans (our arithmetic)

The only visible effect is at 2% or more of the loan at 75% loan-to-value or below, where the median is 0.115 to 0.375 point lower than for loans with no points; at 75.01% to 80% it is equal and above 80% it is higher. Between 0 and 2 points the medians are the same or higher. We also asked a stricter question: among loans from the same lender in the same loan-to-value band and purpose (cells of 30 or more loans, 54,911 loans, 142 lenders), how many points of rate does each point of price (points paid less credits received) associate with? The answer is -0.040 point of rate per point of price (standard error 0.002); with state added to the cell it is -0.011 (standard error 0.003; 30,421 loans, 118 lenders) (our arithmetic). That is far below any exchange rate in the break-even table, and we do not use it: it reflects how little public data can say about a lender's price sheet, and the missing credit score. The practical conclusion is that a public record cannot replace your own quote. Ask for the par rate, the rate with each number of points and the rate with a credit, on the same day.

The tax rule for points on a rental

Publication 527 (2025), Residential Rental Property, says in its Points section: “Because points are prepaid interest, you generally can’t deduct the full amount in the year paid, but must deduct the interest over the term of the loan.” It follows the original issue discount rules. When the OID is de minimis, meaning under “one-fourth of 1% (0.0025) of the stated redemption price at maturity multiplied by the number of full years” of the term, you may choose one of four ways: constant yield, straight line, in proportion to stated interest, or all at maturity. On a $250,000 30-year loan the threshold is $18,750 (0.0025 x $250,000 x 30), so one point ($2,500) is de minimis, and the straight-line deduction is $83.33 a year (our arithmetic; the publication's own example is $1,500 of points on $100,000, which allows $50 a year for 30 years). If the OID is not de minimis you must use the constant-yield method.

Three rules decide whether the points are lost or only delayed:

Publication 527 (2025) on points when a rental loan changes

Because the unamortized points are deductible when the loan ends and the interest you save is lower deductible interest, the tax effect is proportional on both sides: with the same marginal rate on each, the after-tax result is (1 - tax rate) times the pre-tax result at the month the loan ends. The break-even month does not move; the cash at risk falls by the tax rate (our arithmetic). That is a simplification: it ignores when the deductions arrive, the passive-activity and at-risk limits that Publication 527 flags for rental losses, and state tax. Points on a second home follow a different rule (Publication 936: “You can deduct these points only over the life of the loan”), so a calculator built for a home purchase mixes rules. This is analysis of public documents, not tax advice; ask your preparer how your points are treated.

What a reader can do with this

1. Get three numbers from the same lender on the same day: the rate with no points and no credit, the rate with each number of points you are considering, and the rate with a lender credit. Type them into the calculator; the exchange rate is the unknown the table above cannot give you.
2. Write down the month the loan will end before you read the break-even. A cash-out refinance, a sale or a move to a new loan each set the month. If a prepayment penalty applies, the penalty term (median 36 months in HMDA's consumer-purpose investor loans) is the earliest ending. Compare it with the break-even months in the table; the cheaper path before that month is the loan with no points or a credit.
3. Ask whether the quoted rate already includes the investor fee. On an agency loan the 1.125% to 4.125% investor line is in the price whichever way the lender shows it. Putting more down changes it in steps at 60%, 70%, 75% and 80% loan-to-value.
4. On a rental, plan for the tax timing, not a tax win. Points are deducted over the term and the rest when the loan ends; do not use a deduction to justify points you will not hold long enough. Do not refinance the remainder with the same lender without asking about the deduction.
5. If your loan is business-purpose, there is no public benchmark. Compare quotes from at least three lenders; the DSCR and hard-money pages (DSCR loan rates, how to refinance a DSCR loan, cash-out refinance on an investment property) have what the record does show, and the DSCR loan calculator and rental depreciation calculator price the rest.

Kiavi pays us a referral fee when a loan closes through its button in the box below; the figures above are the same either way, and Visio Lending, also in the box, makes 30-year rental loans, the refinance step after a flip or BRRRR, not short-term loans.

FAQ

Sources: Fannie Mae, Loan-Level Price Adjustment Matrix dated 09.30.2026 (singlefamily.fanniemae.com/media/9391/display); IRS Publication 527 (2025), Residential Rental Property, section Points and Settlement fees and other costs; IRS Publication 936 (2025), Home Mortgage Interest Deduction; 12 CFR 1026.3 (Regulation Z, eCFR); 12 CFR 1003.4 and Supplement I (Regulation C, CFPB); HMDA loan-level data for 2025 (FFIEC), nationwide originated conventional first-lien closed-end loans on one-to-four-unit investment properties, recounted with the script hmda_points_final.py in the data folder. The break-even tables, net results, LLPA sums and the within-lender estimates are our arithmetic on example inputs, not market quotes or advice. Compiled October 27, 2026. This is analysis of public documents, not investment, legal or tax advice.