Should you pay points for a lower rate? See the upfront cost, when it pays for itself, and what a temporary 2-1 buydown would cost.
Your loan
$
Rate options
%
points
%
years
Are the points worth it?
Break-even point
$0
Net savings over your stay
$0
Cost of points—
Payment with no points—
Payment with points—
Monthly savings—
2-1 buydown cost (at the no-points rate)—
Year 1 / year 2 payment with a 2-1 buydown—
How this is calculated
Cost of points = loan amount × points ÷ 100. Monthly savings = payment at the no-points rate − payment at the lower rate.
Break-even (months) = cost of points ÷ monthly savings. Net savings over your stay = monthly savings × months + (difference in remaining balances) − cost of points.
One discount point costs 1% of the loan amount and permanently lowers your rate, typically by around a quarter of a percentage point, although the exact trade depends on the lender and the market. Compare the offers on your Loan Estimates: points appear in section A of the Loan Estimate as "points".
Points pay off only if you keep the loan past the break-even month. If you might sell or refinance sooner, a lower-cost loan usually wins. A 2-1 buydown is different: it lowers the payment by 2 percentage points in year one and 1 point in year two, then returns to the note rate. The buydown cost equals the payment reduction, and it is often paid by the seller or builder as a concession. See should I refinance for how break-even works.
Common questions
How much does one point lower the rate?
It varies by lender and market; many quotes show roughly 0.25 percentage points per point. Always compare actual quotes rather than rules of thumb.
Are mortgage points tax deductible?
Points paid to buy your main home can often be deducted, subject to IRS rules. See IRS Publication 936 or ask a tax professional.
Is a 2-1 buydown better than points?
A buydown only helps for two years, so it suits buyers who expect income to rise or plan to refinance. Points lower the rate for the life of the loan.