Buying mortgage points sounds simple — pay more upfront, get a lower rate forever. But "forever" is usually 30 years, and you probably won't stay that long. Here's the math that makes the decision obvious.

What mortgage points actually are

One discount point costs 1% of your loan amount and typically reduces your interest rate by about 0.25% — though the exact reduction varies by lender and market.

Point cost on a $400,000 loan:
1 point = $4,000 upfront · Rate reduction: ~0.25% · Monthly savings: ~$53/mo

Points are paid at closing — they're part of your upfront cash requirement alongside the down payment and other closing costs.

The break-even calculation

The only question that matters: how many months until your savings cover the point cost?

Break-even formula:
Point cost ÷ Monthly savings = Months to break even

If 1 point costs $4,000 and saves you $53/month, break-even is 75 months (6.3 years). If you plan to stay more than 6 years, buying the point makes sense. If you might move or refinance in 3–4 years, you'll come out behind.

Points at every loan size

The math scales with your loan amount. Larger loans benefit more from rate buydowns — the monthly savings are bigger, shortening the break-even period.

Loan amount1 point costRate reductionMonthly savingsBreak-even
$250,000$2,5000.25%~$37/mo~67 months
$350,000$3,5000.25%~$52/mo~67 months
$500,000$5,0000.25%~$74/mo~67 months
$700,000$7,0000.25%~$104/mo~67 months

Assumes 0.25% rate reduction per point at 6.5% base rate, 30-year fixed. Actual rate reduction varies by lender.

Notice that break-even is roughly the same regardless of loan size — about 5.5–6 years per point. The real variable is the rate reduction your lender actually offers per point, which can range from 0.125% to 0.375%.

Run the numbers for your loan

Use the calculator to see your base payment — then factor in the point cost and savings manually.

Try it — adjust for your situation

$
Down payment20% — $80,000
Interest rate6.50%
Monthly payment
$2,789
P&I · Taxes · Insurance
Total interest
$408,142
Principal & Interest$2,023/mo
Property Tax$600/mo
Homeowners Insurance$167/mo
Open full calculator →

When buying points makes sense

  • You're staying long-term — 7+ years in the home virtually guarantees points pay off
  • Large loan balance — the savings are higher in dollar terms even if the break-even timeline is similar
  • You have the cash — don't deplete your emergency fund to buy points
  • Rates are high — buying points when rates are elevated gives you more room to benefit before you'd refinance

When to skip the points

  • Short time horizon — planning to sell or refinance within 3–5 years
  • Cash is tight — every dollar at closing counts; points are optional
  • Rates may fall — if you expect rates to drop, you'll refinance and lose the points anyway
  • Better uses of capital — a larger down payment or paying off high-interest debt often beats buying points

Discount points vs. origination points

These are often confused. Discount points buy down your rate and are the focus of this analysis. Origination points are a lender fee for processing the loan — they do not reduce your rate. Always ask your lender which type they're quoting.

Origination points are a cost of getting the loan, period. Discount points are an optional investment in a lower rate.

Bottom line

  • 1 point = 1% of loan amount = ~0.25% rate reduction
  • Break-even is typically 5–7 years per point bought
  • Only buy points if you're confident you'll stay past break-even
  • Always compare the quoted rate reduction — it varies meaningfully between lenders

Calculate your payment with and without points →

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