Mortgage Points Explained 2026: When Buying Points Makes Sense
Should you pay upfront to lower your rate? 1 point = 1% of loan = ~0.25% lower rate.Here's exactly when it's worth it—and when you're throwing money away.
⚡ Quick Definition
Mortgage points = upfront fees to lower your interest rate.
1 Point
= 1% of loan amount
≈ 0.25%
rate reduction per point
4-7 Years
typical break-even
What Are Mortgage Points?
Mortgage points (also called "discount points") are prepaid interest. You pay money upfront at closing to get a lower interest rate for the life of your loan.
Think of it as "buying down" your rate. The more points you buy, the lower your rate—but the more cash you need at closing.
💡 Example: $400,000 Loan
| Points | Cost | Rate | Monthly Payment |
|---|---|---|---|
| 0 points | $0 | 6.50% | $2,528 |
| 1 point | $4,000 | 6.25% | $2,462 |
| 2 points | $8,000 | 6.00% | $2,398 |
Savings with 1 point: $66/month = $792/year = $23,760 over 30 years
Discount Points vs Origination Points
IMPORTANT: Not all "points" are the same. Make sure you know which type you're being quoted.
| Feature | Discount Points ✅ | Origination Points ⚠️ |
|---|---|---|
| Purpose | Lower your rate | Lender processing fee |
| Optional? | Yes, your choice | Often required |
| Benefit to You | Lower monthly payment | None |
| Tax Deductible? | Yes (usually) | Usually not |
| Negotiable? | N/A (you choose) | Yes, always negotiate! |
⚠️ Watch Out!
Some lenders quote rates "with points" to look competitive. Always ask: "Is this rate with or without points?" and "How many points are included?"
Calculate Your Break-Even Point
The break-even point tells you how long you need to keep the loan for points to pay off.
🧮 Break-Even Formula
Break-Even (months) = Cost of Points ÷ Monthly Savings
Example:
- Cost of 1 point: $4,000
- Monthly savings: $66
- Break-even: $4,000 ÷ $66 = 60.6 months (5 years)
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When Buying Points IS Worth It ✅
- You'll keep the loan 7+ years — Past break-even, you're saving money
- You have extra cash at closing — Don't drain your emergency fund
- You want the lowest possible payment — Points reduce your monthly burden
- You're in a high tax bracket — Points are often tax-deductible
- Rates are high and unlikely to drop — Less chance you'll refinance
When Buying Points IS NOT Worth It ❌
- You might sell in 3-5 years — You won't reach break-even
- You might refinance soon — If rates drop, you'll lose the points
- You're cash-strapped — Keep money for emergencies/repairs
- You're getting a great rate already — Diminishing returns
- You could invest the money instead — 7%+ returns beat point savings
Current Point Rates by Lender (Feb 2026)
| Lender | 0 Points Rate | 1 Point Rate | 2 Points Rate |
|---|---|---|---|
| Rocket Mortgage | 6.50% | 6.25% | 6.00% |
| Better.com | 6.375% | 6.125% | 5.875% |
| LoanDepot | 6.625% | 6.375% | 6.125% |
| Veterans United | 6.25% | 6.00% | 5.75% |
*Rates as of Feb 2026. Your rate depends on credit, down payment, loan type.
🔍 Compare Rates With & Without Points
See personalized quotes from multiple lenders. Compare 0-point vs 1-point rates side-by-side.
Compare Lender Rates →Frequently Asked Questions
What are mortgage points?
Mortgage points are upfront fees you pay to lower your interest rate. 1 point = 1% of your loan amount and typically reduces your rate by 0.25%.
How much does 1 mortgage point cost?
1 point costs 1% of your loan. On a $400,000 loan, 1 point = $4,000. You can buy partial points (0.5, 0.25) for proportional costs.
Is buying mortgage points worth it?
It depends on how long you'll keep the loan. Calculate your break-even point. If you'll stay past break-even (typically 4-7 years), points are worth it.
Are mortgage points tax deductible?
Yes, discount points are generally tax-deductible in the year you pay them (for a purchase) or over the life of the loan (for a refinance). Consult a tax professional.
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David Rodriguez
Refinance & Rate Specialist
Refinance expert with 10+ years in rate analysis and market trend forecasting.