Guide · Homebuying
Are mortgage points worth it?
Points trade cash today for a lower rate for the life of the loan. Whether that pays off depends almost entirely on one number: how long you keep the loan.
By the CalcLedger editorial team · Updated September 2026 · 4 min read · Examples use illustrative rates · How we calculate
On this page
Key takeaways
- One discount point costs 1% of the loan amount and lowers your rate for the life of the loan.
- On a $320,000 loan, 1 point ($3,200) that cuts the rate from 6.75% to 6.50% saves $53 a month and breaks even in about 61 months.
- Kept for 10 years, that point comes out about $4,800 ahead; sold or refinanced after 3 years, it loses about $800.
- Points make sense when you are confident you will keep the loan well past break-even and rates are unlikely to fall enough to refinance.
When you get a mortgage quote, the lender usually offers a menu: a rate with no points, a lower rate if you pay points, and sometimes a higher rate with a lender credit toward your closing costs. Discount points are prepaid interest. You pay more at closing, and in exchange your monthly payment is lower for as long as you keep the loan. How much each point lowers the rate varies by lender and market; many quotes show roughly a quarter of a percentage point per point, but you should always compare the actual offers on your Loan Estimates, where points appear in the origination charges.
The break-even math
The test is simple: divide the cost of the points by the monthly savings. Take a $320,000, 30-year loan:
| Option | Rate | Upfront cost | Monthly payment (P&I) | Monthly savings | Break-even |
|---|---|---|---|---|---|
| No points | 6.75% | $0 | $2,076 | — | — |
| 1 point | 6.50% | $3,200 | $2,023 | $53 | 61 months |
| 2 points | 6.25% | $6,400 | $1,970 | $105 | 61 months |
In this example each point buys the same quarter-point reduction, so one and two points break even at about the same time; two points simply double both the bet and the payoff. Real price menus are rarely that tidy, which is why running each option through the mortgage points calculator matters.
Net savings depend on how long you keep the loan
Break-even tells you when the monthly savings have repaid the points. The fuller measure also counts the fact that a lower rate pays the balance down a little faster, so you owe slightly less if you sell or refinance. Here is the net result of each option compared with paying no points:
| Keep the loan for | 1 point ($3,200) | 2 points ($6,400) |
|---|---|---|
| 3 years | about $790 lost | about $1,580 lost |
| 5 years | about $820 ahead | about $1,640 ahead |
| 7 years | about $2,430 ahead | about $4,850 ahead |
| 10 years | about $4,830 ahead | about $9,630 ahead |
| 15 years | about $8,680 ahead | about $17,290 ahead |
Notice that five years already comes out slightly ahead even though simple break-even is 61 months: the faster paydown adds a few hundred dollars. The pattern is the point, though. Short stays lose money on points; long stays win, and the longer you stay, the bigger the win.
The hidden risk: refinancing early
Most people do not keep a mortgage for 30 years. They move, or they refinance when rates fall. If rates drop a year or two after you close and you refinance, the points you paid are mostly lost, because the new loan starts over. So paying points is partly a bet that rates will not fall enough to make refinancing attractive during your break-even period. When rates are high relative to recent years, that bet is riskier, and many borrowers prefer a no-point loan and keep the cash.
When points make sense
- You expect to stay in the home and keep this loan well past the break-even month.
- You have extra cash after covering your down payment, closing costs and an emergency fund.
- The seller is paying concessions that you can apply to points.
- Rates are low relative to what you expect in the future, so refinancing is unlikely.
And when to skip them: you might move within five years, cash is tight, or you think rates could fall and you would refinance. In that case a lender credit, which does the opposite of points, can even be the better deal.
Points vs. a temporary buydown
Points lower the rate permanently. A temporary buydown such as a 2-1 lowers the payment for only the first two years, and is often paid by a seller or builder. See how a 2-1 buydown works for that comparison.
Frequently asked questions
Are mortgage points tax deductible?
Points paid to buy your main home can often be deducted, subject to IRS conditions; points on a refinance are usually deducted over the life of the loan. See IRS Publication 936 or ask a tax professional.
How much does one point lower the rate?
It depends on the lender, loan type and market. Compare real quotes rather than relying on a rule of thumb.
Are points the same as origination fees?
No. Origination fees pay the lender for making the loan and do not lower your rate. Discount points buy a lower rate. Both appear in the origination charges on the Loan Estimate.
Can I pay a fraction of a point?
Yes. Lenders often price in eighths or quarters of a point, such as 0.5 or 1.25 points.
Test your own quotes in the mortgage points calculator.
Sources
- Consumer Financial Protection Bureau: Loan Estimate explainer
- Consumer Financial Protection Bureau: Mortgage interest rate vs. APR
- Internal Revenue Service: Publication 936, Home Mortgage Interest Deduction
Rules, limits and program details are checked against these official sources. Example numbers are calculated by CalcLedger with the formulas on our how we calculate page. Read our editorial policy.
Ad placement — in-content unit