Mortgage Discount Points: Is Buying Down the Rate Worth It?
October 21, 2026
A discount point costs 1% of the loan amount and typically lowers the interest rate by around 0.25%, though the actual reduction varies by lender and market. On a $300,000, 30-year loan, one point costs $3,000. If it lowers the rate from 6.5% to 6.25%, the monthly principal-and-interest payment falls from $1,896.20 to $1,847.15, a saving of $49.05, so you break even after about 61 months, a little over five years.
Skip the math and get your answer instantly:
Open the Mortgage Calculator →The Break-Even Calculation
Break-even months = cost of points ÷ monthly savings = $3,000 ÷ $49.05 ≈ 61 months. If you keep the loan and do not refinance beyond that point, you come out ahead. If you sell or refinance sooner, you lose money on the points.
After 10 years, the 120 payments save $5,886, a net gain of $2,886 after the $3,000 cost, ignoring the time value of money.
| Option | Rate | Monthly P&I | Upfront cost |
|---|---|---|---|
| No points | 6.50% | $1,896.20 | $0 |
| 1 point | 6.25% | $1,847.15 | $3,000 |
When Points Make Sense
Points favor people who expect to keep the mortgage for a long time and have the cash available without draining reserves. They are less attractive if you may move within five to seven years, or if rates may fall enough to refinance.
Compare the point option to alternatives for that cash: a larger down payment (which may remove mortgage insurance), paying off high-rate debt, or keeping the cash as a safety buffer.
Points vs. Lender Credits
The reverse is a lender credit, where you accept a higher rate in exchange for lower closing costs. It can make sense if you plan to stay only a short time.
Ask lenders for loan estimates with and without points, and compare the annual percentage rate (APR) and the break-even point, not only the rate. Points on a purchase mortgage may be tax deductible in some situations, so check with a tax adviser.
Frequently Asked Questions
What is a mortgage point?
A fee of 1% of the loan amount paid at closing to reduce the interest rate.
How do I calculate the break-even for mortgage points?
Divide the cost of the points by the monthly payment savings to get months to break even.
How much does a point reduce the rate?
Typically about 0.25%, but it varies by lender and market conditions.
Are mortgage points worth it if I might refinance?
Probably not. If you refinance before breaking even, you lose the unrecovered portion of the cost.