Closing Costs

Are Mortgage Points Worth It? How to Find Your Break-Even

By Aritz Boveda · Updated October 21, 2026
Fact-checked against primary sources on October 21, 2026

Mortgage points are worth it only if you keep the loan longer than the break-even point: the number of months it takes for the lower payment to repay what the points cost upfront. One point costs 1% of the loan amount. On a $320,000 loan, paying one point ($3,200) to lower the rate from 6.75% to 6.5% saves about $53 a month, so it takes about 61 months, just over five years, to break even. Sell or refinance before then and you lose money.

What a point is

A discount point is prepaid interest. You pay it at closing in exchange for a lower interest rate for the life of the loan. Each point equals 1% of the loan amount, and lenders also sell fractions of a point.

How much one point lowers your rate isn’t fixed. It depends on the lender, the loan program and the market on the day you lock. The CFPB’s consumer guidance stresses that points and lender credits are a trade-off between paying more now and paying more later, and that you should compare offers on the same day, for the same loan.

Points show up in the “Origination Charges” section of your Loan Estimate and Closing Disclosure. They’re a lender charge, so once your rate is locked the amount generally can’t increase at closing unless there’s a valid changed circumstance, such as a change in your loan amount or credit. Also ask what each lender means by “points”: some use the word for any percentage-based fee, even one that doesn’t lower your rate.

Lender credits: points in reverse

You can also go the other way: accept a higher rate and the lender gives you a credit toward your closing costs. That can make sense if you’re short on cash at closing or expect to move or refinance soon. The same break-even logic applies, reversed.

Worked example

• Monthly savings: about $53
• Break-even: $3,200 ÷ $53 ≈ 61 months
• Keep the loan 7 years: you come out about $1,240 ahead
• Keep the loan 3 years: you’re about $1,300 behind

The key question isn’t the rate. It’s how long you’ll really keep this specific loan.

When points tend to make sense

• You plan to stay put for many years and don’t expect to refinance.
• Rates seem unlikely to fall much. If rates drop and you refinance, the points you paid are gone.
• You have spare cash after the down payment, closing costs and an emergency fund.
• The seller is paying. If you negotiate seller concessions, using them to buy points can stretch them further than a price cut, though the loan program caps seller contributions. Fannie Mae, for example, allows 3% to 9% of the price on a primary residence, depending on your down payment, and FHA and VA set their own limits.

When to skip them

• You might move for work, upsize or sell within a few years.
• You expect to refinance if rates drop.
• Paying points would drain your emergency savings.
• Putting the same money toward a larger down payment would remove PMI. Reaching 20% down often saves more than a small rate cut.

Points vs. a bigger down payment

Both use cash at closing to lower your monthly cost. Run both through the numbers:

• Points lower the rate on the whole loan but the money doesn’t build equity.
• A larger down payment reduces the loan, builds equity you get back when you sell and, at 20% down on a conventional loan, removes PMI entirely. See how PMI works and how to remove it.

If you’re close to 20% down, the down payment usually wins. If you’re already at 20% or more and staying long-term, points become more attractive.

How to shop for points

1. Ask each lender for a Loan Estimate on the same day, with and without points.
2. Compare the rate, the points cost in dollars, and the APR.
3. Ask for the exact rate reduction per point. If one point only drops the rate by a tiny amount, the break-even can be a decade or more.
4. Put the numbers in the calculator and compare the break-even to how long you realistically expect to keep the loan.

Tax note

Points paid to buy your main home may be deductible as mortgage interest in the year you pay them if you itemize and meet the IRS conditions. Points on a refinance or a second home are generally deducted gradually over the life of the loan. Many buyers take the standard deduction and get no tax benefit at all, so check IRS Topic 504 or ask a tax professional rather than counting on it.

The bottom line

Ignore how attractive the lower rate looks and focus on time. If you’re confident you’ll keep the loan well past the break-even month, points can save real money. If there’s a fair chance you’ll move or refinance first, keep the cash.