Mortgage Points Calculator 2026: Is Buying Down Your Rate Worth It?
Should you pay points to lower your rate? Calculate your break-even point, see real savings examples, and make the right decision for your situation.
⚡ Quick Answer: Should You Buy Points?
✅ BUY POINTS IF:
- • Staying 5+ years in the home
- • Have extra cash after down payment
- • Want lowest possible monthly payment
- • Can itemize tax deductions
❌ SKIP POINTS IF:
- • Selling or refinancing in <5 years
- • Cash is tight for down payment
- • Rates may drop (refinance opportunity)
- • Better ROI elsewhere
📊 Mortgage Points at a Glance
🎯 Get Personalized Rate Quotes
Compare rates with and without points from multiple lenders. See exactly how much you can save:
📋 In This Guide
What Are Mortgage Points?
Mortgage points (also called discount points) are upfront fees you pay to your lender at closing to "buy down" your interest rate. Think of it as prepaying interest to get a lower rate for the life of your loan.
💡 Key Formula:
1 Point = 1% of Loan Amount = ~0.25% Rate Reduction
Example: $400,000 loan × 1 point = $4,000 cost → Rate drops from 6.75% to 6.50%
Points vs. Origination Fees
Don't confuse discount points with origination fees (sometimes called "origination points"):
| Type | Purpose | Benefit to You |
|---|---|---|
| Discount Points | Lower your rate | Yes - lower payments |
| Origination Fees | Lender processing fee | No - just a cost |
How Mortgage Points Work
Point Cost by Loan Amount
| Loan Amount | 0.5 Points | 1 Point | 2 Points |
|---|---|---|---|
| $300,000 | $1,500 | $3,000 | $6,000 |
| $400,000 | $2,000 | $4,000 | $8,000 |
| $500,000 | $2,500 | $5,000 | $10,000 |
| $750,000 | $3,750 | $7,500 | $15,000 |
Rate Reduction Examples
| Points Paid | Base Rate | New Rate | Rate Reduction |
|---|---|---|---|
| 0 Points | 6.75% | 6.75% | — |
| 0.5 Points | 6.75% | 6.625% | -0.125% |
| 1 Point | 6.75% | 6.50% | -0.25% |
| 2 Points | 6.75% | 6.25% | -0.50% |
Break-Even Calculator
The break-even point is when your monthly savings equal the upfront cost of points. After this point, you're saving money every month.
📐 Break-Even Formula:
Break-Even (months) = Points Cost ÷ Monthly Savings
Example: $4,000 ÷ $65/month = 61.5 months (5.1 years)
Break-Even Analysis: $400,000 Loan
| Scenario | No Points | 1 Point ($4,000) | 2 Points ($8,000) |
|---|---|---|---|
| Interest Rate | 6.75% | 6.50% | 6.25% |
| Monthly Payment (P&I) | $2,594 | $2,528 | $2,463 |
| Monthly Savings | — | $66/mo | $131/mo |
| Break-Even Point | — | 5.1 years | 5.1 years |
| 10-Year Savings | — | $3,920 | $7,720 |
| 30-Year Savings | — | $19,760 | $39,160 |
🧮 Get Your Personalized Calculation
Every lender offers different point pricing. Compare quotes to see exact savings with and without points:
Compare Rate Quotes With/Without PointsReal-World Examples
Example 1: First-Time Buyer (5-Year Plan)
Situation: Sarah is buying a $350,000 home with 10% down ($315,000 loan). She plans to stay 5 years.
Option A: 6.75% with no points
Option B: 6.50% with 1 point ($3,150)
Monthly Savings: $52/month
Break-Even: 60.6 months (5.05 years)
❌ Verdict: NOT worth it - break-even is right at her timeline. Too risky.
Example 2: Forever Home (10+ Years)
Situation: Mike and Lisa are buying their forever home for $600,000 with 20% down ($480,000 loan).
Option A: 6.75% with no points
Option B: 6.25% with 2 points ($9,600)
Monthly Savings: $157/month
Break-Even: 61 months (5.1 years)
10-Year Savings: $9,240 net ($18,840 - $9,600)
✅ Verdict: WORTH IT - significant savings over 10+ years.
Example 3: Refinance Likely (Rates May Drop)
Situation: John expects rates to drop in 2026-2027 and plans to refinance when they hit 5.5%.
Analysis: If he refinances in 2 years, he won't recoup point costs.
❌ Verdict: SKIP points - refinance will reset the clock.
Tax Deduction Benefits
Mortgage points are generally tax deductible, which can reduce the effective cost:
| Loan Type | Deduction Timing | Notes |
|---|---|---|
| Home Purchase | Year paid | Full deduction in closing year |
| Refinance | Over loan life | Spread over 30 years |
💡 Tax Savings Example:
If you pay $4,000 in points and are in the 24% tax bracket, you could save $960 in taxes ($4,000 × 24%). This effectively reduces your point cost to $3,040.
When Are Points Worth It?
✅ Points ARE Worth It When:
- • Long-term ownership: Staying 7+ years
- • Extra cash available: After down payment and reserves
- • Rates are stable: Unlikely to refinance soon
- • Tax benefits: You itemize deductions
- • Large loan: Bigger savings on higher balances
❌ Points Are NOT Worth It When:
- • Short-term: Selling or moving in <5 years
- • Refinance likely: Rates expected to drop
- • Cash-strapped: Need funds for down payment
- • Better ROI: Money could earn more elsewhere
- • ARM loan: Rate will adjust anyway
Frequently Asked Questions
What are mortgage points?
Mortgage points (discount points) are upfront fees paid to lower your interest rate. One point costs 1% of your loan amount and typically reduces your rate by 0.25%. For example, on a $400,000 loan, 1 point costs $4,000 and might lower your rate from 6.75% to 6.50%.
How much does 1 mortgage point cost?
One mortgage point costs 1% of your loan amount. On a $300,000 loan, 1 point = $3,000. On a $500,000 loan, 1 point = $5,000. You can buy fractional points (0.5 points, 0.25 points) for proportional costs.
How much do mortgage points reduce your rate?
Typically, 1 point reduces your rate by 0.25% (25 basis points). However, this varies by lender and market conditions. In some cases, 1 point may reduce your rate by 0.125% to 0.375%. Always compare the exact rate reduction offered.
When is buying mortgage points worth it?
Buying points is worth it if you plan to stay in the home longer than your break-even period (typically 4-7 years). If you'll sell or refinance sooner, you won't recoup the upfront cost.
Are mortgage points tax deductible?
Yes, mortgage points are generally tax deductible. For a home purchase, you can typically deduct points in the year you pay them. For refinances, points must be deducted over the life of the loan.
🚀 Get Your Personalized Rate Analysis
Compare quotes with and without points from multiple lenders. See exactly how much you can save and make the right decision.
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