Should I Buy Mortgage Points?
$
%
%
pts
1 point = 1% of loan amount%
What your cash could earn elsewhereyrs
Sell/refi horizonBreak-Even Point
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Stay past this point and buying points saves money
Points Cost
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Monthly Savings
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Lifetime Interest Saved
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Net Savings (lifetime)
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Payment No Points
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Payment With Points
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Hold-period check: If you sell or refinance before break-even, points usually lose money. The matrix below ranks point options using your opportunity cost and hold period.
Points Break‑Even Matrix
This is an estimate. Lenders price points non‑linearly. Always ask for the full rate sheet and compare multiple point options.
What Are Mortgage Points?
Mortgage discount points are upfront fees paid to the lender in exchange for a lower interest rate. One point equals 1% of the loan amount. Paying one point on a $400,000 loan costs $4,000 and typically reduces the rate by 0.25%.
When Do Points Make Sense?
Points make sense when: the break-even period is under 5 years and you plan to stay longer; you have cash to spare after the down payment; rates are high and you expect to keep the loan long-term; or you're in a high tax bracket (points are tax-deductible in the year of purchase).
When to skip points: You plan to move or refinance within 5 years; you're short on cash reserves; you're using a large down payment and prefer liquidity; or the rate reduction offered is less than 0.125% per point.
Yes — points paid on a home purchase mortgage are generally fully deductible in the year paid if you itemize. Points on a refinance must be deducted over the life of the loan (pro-rated annually). Consult a tax advisor for your specific situation.
The reduction varies by lender, loan type, and market conditions. Typically 0.20–0.375% per point. Some days the "price" of a point is very efficient (0.375%+); other days it's poor value (0.10–0.15%). Ask your lender for the full rate sheet to compare different point/rate combinations.