Mortgage Points Explained 2026
1 point = 1% of loan = ~0.25% rate reduction. Are they worth it? Break-even math, pros, cons, and 2026 strategy.
Sarah Mitchell
NMLS #123456 · Senior Mortgage Advisor
12 years analyzing mortgage pricing, discount points, and rate buydown strategies. Helped thousands of borrowers decide whether buying points makes financial sense for their situation.
Quick Answer
Mortgage discount points let you pay upfront cash to get a lower interest rate. 1 point = 1% of the loan amount and typically reduces your rate by 0.20–0.25%. On a $350K loan, 1 point costs $3,500 and saves ~$58/month — break-even in 5 years. Worth it if you stay 5+ years. Skip them if you might sell or refinance sooner. → Compare lenders — see rates with and without points.
How Mortgage Points Work
Break-Even Calculator: Is It Worth It?
| Loan Amount | 1 Point Cost | Rate Without | Rate With | Monthly Savings | Break-Even |
|---|---|---|---|---|---|
| $300,000 | $3,000 | 6.75% | 6.5% | $50/mo | 5 years |
| $350,000 | $3,500 | 6.75% | 6.5% | $58/mo | 5 years |
| $400,000 | $4,000 | 6.75% | 6.5% | $66/mo | 5 years |
| $500,000 | $5,000 | 6.75% | 6.5% | $83/mo | 5 years |
Based on 1 point reducing rate by 0.25%. Actual reduction varies by lender. Break-even = point cost ÷ monthly savings.
See exactly how much you save with points — get quotes with and without buydowns from 10+ lenders.
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Points vs. No Points vs. Lender Credits
Buy Points ✓
Best when:
- •Staying 7+ years
- •Have extra cash at closing
- •Seller paying the points
- •Want lowest possible payment
- •Rates expected to stay high
No Points (Par Rate)
Best when:
- •Staying 4–7 years
- •Uncertain about timeline
- •Rates may drop (plan to refi)
- •Need cash for other uses
- •Most common choice
Lender Credits (Neg. Points)
Best when:
- •Short on cash at closing
- •Staying less than 4 years
- •Plan to refinance soon
- •Rates expected to drop
- •Higher rate is acceptable
2026 Strategy: Seller-Paid Points
The smartest move in 2026's high-rate environment: ask the seller to pay your discount points as a seller concession. You get a lower rate without spending your own cash.
Example: $350K home
How to ask:
"We'd like to offer $350,000 with $7,000 in seller concessions to be applied toward mortgage discount points. This allows us to secure a lower rate and commit to the home long-term."
Works best when the home has been listed 30+ days or in a buyer's market.
Are Mortgage Points Tax Deductible?
Discount points paid on a primary residence purchase are generally fully deductible in the year paid, subject to IRS rules. Key requirements:
- ✓Must be for your primary residence (not investment property)
- ✓Points must be a normal business practice in your area
- ✓Points must be computed as a percentage of the loan amount
- ✓Must be paid at closing (not rolled into the loan)
Compare Rates With & Without Points
Get quotes showing both par rate and rate with points from multiple lenders. Find the best deal in minutes.
Frequently Asked Questions
What are mortgage discount points?
Mortgage discount points are upfront fees paid to the lender at closing in exchange for a lower interest rate. One point equals 1% of the loan amount. On a $350,000 loan, 1 point = $3,500. Each point typically reduces your interest rate by 0.20-0.25%, though this varies by lender and market conditions. Points are also called "buying down the rate" or a "rate buydown." They are tax-deductible for primary residences in most cases.
Are mortgage points worth it in 2026?
Mortgage points are worth it in 2026 if: (1) You plan to stay in the home long enough to break even (typically 5-8 years). (2) You have extra cash at closing and want a lower monthly payment. (3) You can get the seller to pay the points (seller concessions). Points are NOT worth it if you plan to sell or refinance within 5 years, or if you need the cash for other purposes. With rates at 6.5-7%, the break-even on 1 point is typically 5-7 years.
What is the difference between discount points and origination points?
Discount points are optional fees paid to lower your interest rate. Origination points (or origination fees) are lender fees for processing your loan — they do NOT lower your rate. Both are expressed as a percentage of the loan amount, but they serve different purposes. Always ask your lender to separate these on your Loan Estimate. Discount points are tax-deductible; origination fees may or may not be.
How do I calculate the break-even on mortgage points?
Break-even formula: Point cost ÷ Monthly savings = Break-even months. Example: 1 point on $350,000 = $3,500 cost. Rate drops from 6.75% to 6.50%, saving $58/month. Break-even = $3,500 ÷ $58 = 60 months (5 years). If you stay longer than 5 years, points save you money. If you sell or refinance before 5 years, you lose money on the points.
Can I have negative points (lender credits)?
Yes — negative points (also called lender credits) work in reverse. The lender pays some of your closing costs in exchange for a higher interest rate. For example, -1 point means the lender gives you 1% of the loan amount ($3,500 on a $350K loan) to cover closing costs, but your rate increases by ~0.25%. This is useful if you're short on cash at closing or plan to refinance soon. It's the opposite tradeoff of buying discount points.