Should You Pay Points on Your Mortgage?

Mortgage points can save you tens of thousands of dollars — or be a complete waste of money — depending on one factor: how long you stay in the home.

Use our Mortgage Calculator to compare monthly payments with and without points for your specific loan.

What Are Mortgage Points?

One discount point = 1% of your loan amount paid at closing. In exchange, your lender permanently reduces your interest rate — typically by 0.20–0.25% per point.

Loan Amount	1 Point Cost	Rate Reduction	Monthly Savings*
$300,000	$3,000	−0.25%	~$50/month
$400,000	$4,000	−0.25%	~$67/month
$500,000	$5,000	−0.25%	~$83/month
$600,000	$6,000	−0.25%	~$100/month

*Savings on a 30-year fixed mortgage. Actual reduction per point varies by lender.

The Break-Even Calculation

The only math that matters:

Break-even months = Point cost ÷ Monthly savings

Example: $400,000 loan, 1 point ($4,000), rate drops from 7.00% → 6.75%:

• Payment at 7.00%: $2,661/month
• Payment at 6.75%: $2,594/month
• Monthly savings: $67
• Break-even: $4,000 ÷ $67 = 59.7 months (~5 years)

If you stay in the home longer than 5 years, you come out ahead. If you sell or refinance before 5 years, you lose money on points.

When Paying Points Makes Sense

✅ You plan to stay 7+ years. Long-term owners benefit the most from lower rates.

✅ You’re buying in a high-rate environment. When rates are elevated, even small reductions generate significant savings over 30 years.

✅ You have the cash. Points are only worthwhile if you don’t need to roll them into the loan (which defeats the purpose).

✅ You want to itemize the deduction. Points are fully deductible for purchase mortgages, providing an immediate tax benefit.

✅ You’re on a fixed income or fixed budget. Lower monthly payments permanently improve cash flow for 30 years.

When to Skip Points

❌ You might move in under 5 years. Job changes, family size changes, or relocation plans make points risky.

❌ You’re cash-tight at closing. Using points money to increase your down payment (and eliminate PMI) often provides a better return.

❌ Rates are expected to drop. If you plan to refinance when rates fall, you’ll lose your points investment when you close the new loan.

❌ You have high-interest debt. The guaranteed “return” of paying off a 20% credit card beats the marginal benefit of mortgage points.

How Many Points Should You Buy?

Most lenders offer 0.5 to 3 points. The efficiency curve often bends — meaning the first point provides a better rate-per-dollar than the second. Always calculate the break-even separately for each additional point.

Rule of thumb: Buy at most the number of points that let you break even in 5 years or less.

Points vs. Larger Down Payment

If you’re weighing points vs. a larger down payment:

• Larger down payment reduces PMI faster, improves equity, and is more liquid (home equity can be accessed later)
• Points lock in a lower rate permanently but the money is gone at closing

For most buyers putting down 10–19%, eliminating PMI sooner often beats buying down the rate.

Example: 30-Year True Savings

Scenario: $400,000 loan, 2 points ($8,000), rate: 7.00% → 6.50%

	Without Points	With 2 Points
Monthly payment	$2,661	$2,528
Monthly savings	—	$133
Break-even	—	60 months (5 years)
Savings at year 10	—	$7,960
Savings at year 30	—	$47,880

Over the full 30-year term, 2 points save nearly $48,000 in interest — nearly 6× the upfront cost.

Bottom Line

Paying mortgage points is a pure math decision. Calculate your break-even. If you’ll stay in the home at least 2 years beyond the break-even point, paying for points is worth it. If you’re uncertain about your timeline, keep your cash.

Use our Mortgage Calculator to run your exact numbers — it compares payments with and without points for any loan amount and rate combination.