Are Mortgage Discount Points Worth It? 2025 Calculator & ROI Analysis
Learn exactly when buying points makes sense, how to calculate your break-even period, and how much interest you can save over the life of your loan.
🎯 Quick Verdict on Discount Points in 2025
Mortgage discount points are usually worth it if you plan to keep your loan at least 5–7 years and have the cash to pay for them upfront. Shorter horizon or tight cash? No‑point options often win.
The right move depends on your loan amount, rate, and holding period. You should always run a break‑even analysis before deciding.
See Point vs No‑Point Offers →✓ Soft credit check ✓ Side‑by‑side point options ✓ Full payment breakdown
Quick Answer: Buying 1–2 discount points can make sense if you expect to stay in the home long enough to pass the break‑even point. For many buyers staying 7+ years, points can save $15,000–$40,000 in interest over the life of the loan. If you plan to sell or refinance in a few years, keeping the cash is usually smarter.
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
See your personalized break-even analysis and ROI scenarios
Get Point Options FREE →✓ No credit impact ✓ See all scenarios ✓ Compare 5+ lenders
✅ 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
❓ FAQ: Are Mortgage Discount Points Worth It?
1. How many mortgage points should I buy?
Most buyers consider buying 0.5–2.0 points. More than that rarely makes sense because the cost gets too high. The ideal number of points is where your break‑even period is comfortably shorter than how long you expect to keep the loan.
2. How do I calculate the break-even point on discount points?
Divide the upfront cost of points by your monthly payment savings. For example, $4,000 in points / $67 per month savings ≈ 60 months (5 years). If you plan to stay longer than that, points likely make sense. You can also run numbers with a dedicated refinance/break‑even tool or by getting live quotes that show both options.
3. Are mortgage points tax-deductible?
Points paid on a primary residence purchase are often tax‑deductible as prepaid interest in the year you pay them, but refinance points are usually deducted over the life of the loan. Tax rules are complex, so talk to a tax professional before deciding.
4. Should I buy points if I plan to refinance soon?
Probably not. If you expect to refinance in 2–3 years, you likely will not hit the break‑even point, so paying thousands upfront for a slightly lower rate rarely pays off. In that case, focus on no‑point, low‑fee options and keep cash in reserve.
5. Is it better to use extra cash for points or a bigger down payment?
It depends. A larger down payment can remove PMI and improve your debt‑to‑income ratio, while points directly reduce your rate. Many buyers split their cash: enough down to hit a key threshold (like 20%) and the rest into 0.5–1 point. Compare both scenarios by getting quotes with different down payments and point levels.
6. Do discount points help me qualify for a mortgage?
Buying points lowers your rate and monthly payment, which can slightly improve your debt‑to‑income ratio (DTI). That can help you qualify in tight cases, but lenders still care about credit score, income stability and other factors. If qualification is your main concern, consider first getting fully pre‑approved and then using points as a fine‑tuning tool.
✅ Ready to Calculate Your Point ROI?
Get quotes with point options and see your break-even analysis
Compare Point Options Now →✓ Free analysis ✓ 2 minutes ✓ See all scenarios
📚 Related Guides
Meet David
Refinance & Rate Specialist
David Rodriguez is a seasoned refinancing expert with over 10 years of experience in mortgage rate analysis and market trend forecasting. As a Certified Rate Lock Specialist, he has saved homeowners millions in interest payments through strategic refinancing timing. His expertise in Federal Reserve policy impact and mortgage-backed securities makes him a go-to expert for rate predictions and refinancing strategies.
EXPERTISE:
KEY ACHIEVEMENT:
Saved clients $50M+ in interest payments