Are Mortgage Discount Points Worth It? 2025 Calculator & ROI Analysis
Quick Answer: Mortgage discount points are worth it IF you plan to keep your loan long enough to recoup the upfront cost. For most buyers staying 7+ years, buying 1-2 points saves $15,000-$40,000 over the loan term.
One of the most misunderstood mortgage decisions is whether to buy discount points (also called "buying down the rate"). Many borrowers either overpay by buying too many points, or leave money on the table by not buying any.
The truth? Whether points are worth it depends entirely on YOUR situation: how long you'll keep the loan, your financial position, and current market rates. In this comprehensive guide, we'll show you exactly how to calculate if points make sense for you.
Ready to compare actual lender offers with and without points? Get personalized quotes showing point options from top lenders – see your real ROI in 2 minutes.
🎯 What Are Mortgage Discount Points?
Simple Definition
One mortgage point = 1% of your loan amount paid upfront to lower your interest rate.
Example: On a $400,000 loan, 1 point = $4,000 paid at closing to reduce your rate by approximately 0.25%.
Typical savings: Each point typically lowers your rate by 0.20-0.25%, though this varies by lender and market conditions.
❌ Without Points
- ✗Lower upfront cost at closing
- ✗Higher interest rate (e.g., 6.75%)
- ✗Higher monthly payment
- ✗More interest paid over time
✅ With Points (e.g., 1 point)
- ✓Pay $4,000 upfront at closing
- ✓Lower interest rate (e.g., 6.50%)
- ✓Lower monthly payment
- ✓Less interest paid over time
💰 Real Example: 1 Point Saves $58,000
Let's compare buying 1 point vs no points on a $400,000 loan, 30-year fixed:
Option A: No Points
At Closing:
- Points Cost: $0
- Interest Rate: 6.75%
- Monthly Payment: $2,595
Over 30 Years:
- Total Interest Paid: $534,400
- Total Cost: $934,400
Option B: Buy 1 Point
At Closing:
- Points Cost: -$4,000
- Interest Rate: 6.50%
- Monthly Payment: $2,528
Over 30 Years:
- Total Interest Paid: $510,080
- Total Cost: $914,080
🎯 The Verdict
Monthly Savings
$67/month
(Option B costs less)
Break-Even Point
60 months
(5 years)
30-Year Savings
$20,320
(After paying $4K upfront)
Bottom Line: If you keep the loan 5+ years, buying 1 point saves you money!
🎯 Compare Point Options from Top Lenders
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✅ When Buying Points Makes Sense
✓ You plan to keep the loan 7+ years
Break-even is typically 5-7 years, so longer ownership = more savings
✓ You have cash available at closing
Don't deplete emergency fund. Only buy points if you have reserves.
✓ You want to lower your monthly payment
Points reduce your rate, which reduces your payment (helps with debt-to-income ratio)
✓ You're refinancing and can recoup costs
If refinancing, points make sense if break-even is before your expected refi date
❌ When Buying Points Doesn't Make Sense
✗ You plan to sell or refinance within 5 years
You won't recoup the upfront cost before moving or refinancing
✗ You have limited cash reserves
Keep cash for emergencies. Don't stretch to buy points.
✗ You're a first-time buyer with uncertainty
Life changes happen. Don't lock in extra costs if unsure about staying.
✗ You can invest the money for higher returns
If you can earn 8%+ investing, that might beat the 0.25% rate reduction
✅ Ready to Calculate Your Point ROI?
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