Are mortgage points worth buying?

Points are worth it if you plan to keep the loan long enough to pass the break-even point — typically 5-7 years. If you plan to sell or refinance sooner, skip the points and keep your cash.

How many points should I buy?

Most borrowers buy 0-2 points. The more points you buy, the lower your rate, but each additional point has slightly diminishing returns. Calculate your break-even period for each scenario.

Are mortgage points tax deductible?

Yes, points on a purchase mortgage are fully deductible in the year you pay them. Points on a refinance are deducted ratably over the life of the loan. You must itemize deductions to claim them.

Mortgage Points Explained: Buy Down Your Rate & Save

Q: What are mortgage discount points?

Mortgage discount points are upfront fees paid at closing to reduce your interest rate. One point equals 1% of your loan amount and typically lowers your rate by about 0.25%. They are essentially prepaid interest.

Mortgage points let you pay upfront to lower your interest rate. Learn when buying points makes financial sense and when you should skip them.

What Are Mortgage Points?

Mortgage points (also called discount points) are upfront fees you pay to lower your interest rate. One point equals 1% of your loan amount and typically reduces your rate by 0.25%. On a $400,000 loan, one point costs $4,000 and might lower your rate from 6.5% to 6.25%.

1% = 1pt

Point = % of Loan Amount

0.25%

Typical Rate Reduction/Point

5-7 yrs

Typical Break-Even

Tax Ded.

Points Are Deductible

Points Cost vs. Savings Example

Points	Upfront Cost ($400K)	Rate	Monthly P&I	Monthly Savings	Break-Even
0	$0	6.50%	$2,528	—	—
1	$4,000	6.25%	$2,463	$65	61 months
2	$8,000	6.00%	$2,398	$130	62 months
3	$12,000	5.75%	$2,334	$194	62 months

When Points Make Sense

Buy Points When...

You plan to stay 7+ years, have extra cash beyond your down payment, want the lowest possible long-term cost, and can use the tax deduction.

Skip Points When...

You might move or refinance within 5 years, need cash for down payment or closing costs, or prefer flexibility over long-term savings.

Consider Negative Points

Lender credits (negative points) work in reverse — accept a higher rate and the lender covers some closing costs. Good if you are short on cash.

Points Tax Benefits

Purchase loans — points are fully tax-deductible in the year you pay them
Refinance loans — points are deducted over the life of the loan (amortized)
Itemization required — you must itemize deductions to claim points
Consult your tax advisor — the benefit depends on your overall tax situation

Use our mortgage calculator to compare payments with and without points, or check today's rates.

Should You Buy Mortgage Points?