Are Mortgage Points Worth It 2026? Calculator + Break-Even Analysis
Should you buy mortgage points in 2026? With rates at 6.25%, paying 1 point ($3,000 on $300K loan) lowers your rate to 6.00% and saves $45/month. Break-even: 67 months (5.6 years). Points are worth it if staying 6+ years, NOT worth it if staying less than 5 years or planning to refinance soon. This complete 2026 guide includes break-even calculator, real scenarios, and exact math showing when points make sense. Compare with rate buydowns and refinance options. Compare rates with and without points now.
💰 Mortgage Points Quick Facts (2026)
- ✓1 Point Cost: 1% of loan amount ($3,000 on $300K)
- ✓Rate Reduction: 0.25% per point (6.25% → 6.00%)
- ✓Monthly Savings: $45/month on $300K loan
- ✓Break-Even: 67 months (5.6 years)
- ✓Worth It If: Staying 6+ years, won't refinance soon
- ✓NOT Worth It If: Staying less than 5 years, tight on cash
🎯 Quick Decision Guide
✅ BUY Points If:
- • Staying 6+ years (forever home)
- • Have extra cash at closing
- • Won't refinance soon
- • Want lower monthly payment
❌ DON'T BUY Points If:
- • Staying less than 5 years
- • Tight on cash (need for emergencies)
- • Expect to refinance in 2-3 years
- • Rates likely to drop soon
What Are Mortgage Points?
Mortgage points (discount points) = prepay interest to lower your rate. You pay an upfront fee at closing to "buy down" your interest rate for the life of the loan.
How Points Work:
- • 1 point = 1% of loan amount ($3,000 on $300K loan)
- • Each point lowers rate by ~0.25% (varies by lender)
- • Pay upfront, save monthly (lower payment for 30 years)
- • Tax deductible in year paid (if itemizing)
Example:
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Break-Even Calculator: Are Points Worth It?
Formula: Break-Even = Points Cost ÷ Monthly Savings
Example Calculation ($300K Loan):
Step 1: Calculate Points Cost
1 point = 1% of $300,000 = $3,000
Step 2: Calculate Monthly Savings
Step 3: Calculate Break-Even
$3,000 ÷ $48 = 62.5 months (5.2 years)
Meaning: After 5.2 years, you've recovered the $3,000 cost. Everything after = pure savings!
💡 Decision Rule:
- • Staying 6+ years? Buy points (you'll profit)
- • Staying 4-5 years? Maybe (close to break-even)
- • Staying less than 4 years? Don't buy points (you'll lose money)
Real Scenarios: Points Worth It or Not?
✅ Scenario 1: Forever Home (Worth It!)
Buyer Profile:
- • Buying forever home (plan to stay 15+ years)
- • $300K loan at 6.25%
- • Has extra $3K cash for points
- • Won't refinance (happy with rate)
Without Points:
With 1 Point ($3K):
Verdict: BUY POINTS! After 5.2 years break-even, you save $8,640 over 15 years.
❌ Scenario 2: Starter Home (NOT Worth It!)
Buyer Profile:
- • Buying starter home (plan to upgrade in 3-4 years)
- • $300K loan at 6.25%
- • Tight on cash (need for emergencies)
- • May refinance if rates drop
If Buy 1 Point ($3K):
Verdict: DON'T BUY POINTS!
You lose $696 by selling before break-even. Keep the $3K for moving costs or emergencies instead.
Points Cost by Loan Amount (2026)
| Loan Amount | 1 Point Cost | Monthly Savings | Break-Even |
|---|---|---|---|
| $200,000 | $2,000 | $32/month | 62.5 months (5.2 years) |
| $300,000 | $3,000 | $48/month | 62.5 months (5.2 years) |
| $400,000 | $4,000 | $64/month | 62.5 months (5.2 years) |
| $500,000 | $5,000 | $80/month | 62.5 months (5.2 years) |
💡 Key Insight:
Break-even is the same regardless of loan amount (5.2 years) because both cost and savings scale proportionally. Decision depends on how long you'll stay, not loan size.
Frequently Asked Questions
Are mortgage points tax deductible?
Yes, if you itemize deductions. Points are tax deductible in the year paid for a primary residence purchase. Requirements: (1) Points must be common in your area, (2) Paid directly (not rolled into loan), (3) Used to buy/build primary home. Refinance: Points deducted over life of loan (not all at once). Example: Pay $3K points on 30-year loan = deduct $100/year for 30 years. Tax benefit: $3K deduction × 24% tax bracket = $720 tax savings (reduces effective cost to $2,280).
Can I buy more than 1 point?
Yes, but diminishing returns. You can buy 2-3 points, but each additional point lowers rate less. Example: 1st point = 0.25% reduction, 2nd point = 0.20% reduction, 3rd point = 0.15% reduction. Math: 2 points ($6K) on $300K = 6.25% → 5.75% = $96/month savings, break-even 62.5 months. Recommendation: Max 1-2 points (more than that = too long to break even).
What if I refinance before break-even?
You lose money on points. If you refinance or sell before break-even, you don't recover the points cost. Example: Pay $3K for points, refinance after 3 years (36 months) = only saved $1,728 ($48 × 36) → lost $1,272. Protection: Only buy points if you're 90% sure you'll stay past break-even. Alternative: If rates might drop, skip points and refinance later instead.
Points vs lender credits: which is better?
Opposite strategies. Points: Pay upfront, lower rate (best if staying long-term). Lender credits: Higher rate, $0 closing costs (best if staying short-term or tight on cash). Example: $300K loan → (A) 6.00% + pay $3K points, OR (B) 6.50% + get $3K credit toward closing costs. Choose points if: Staying 6+ years. Choose credits if: Staying less than 5 years or need cash now. Learn about lender credits.
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