Are Mortgage Points Worth It? Run the Break-Even Before You Decide

One point costs 1% of your loan amount and buys a permanently lower rate. That trade is neither good nor bad — it is a bet on how long you keep the loan, and most borrowers never run the number that decides it.

By TermVerify Research Team · Published July 12, 2026 · Data methodology

The short answer

Points are worth it when you will keep the loan past the break-even month:

break-even (months) = cost of points ÷ monthly payment savings

If you might sell or refinance before that month — and the typical break-even runs 5–7 years — take the higher rate and keep the cash. Half of 2025 purchase borrowers who paid points paid $2,602 or less.

The worked example

A $335,000 loan — the 2025 national median — quoted at 6.49% with no points, or 0.25% lower for one point ($3,350):

Break-even comparison for paying one discount point
Option	Rate	Upfront cost	Monthly P&I
No points	6.49%	$0	$2,115
One point	6.24%	$3,350	$2,061

Savings: $54 a month. Break-even: $3,350 ÷ $54 ≈ 62 months — a hair over five years. Keep the loan ten years and the point earns roughly $3,100 on top of its cost; refinance in year three and you burned about $1,400 for nothing. Same numbers, opposite outcomes — the only variable is you.

Honest wrinkle worth knowing: the simple formula slightly flatters points, because the $3,350 could have earned a return elsewhere, and slightly understates them, because the lower rate also builds principal marginally faster. For a five--to-seven-year horizon these roughly cancel; the simple break-even is the right tool.

When points make sense — and when they quietly lose

Points win when this is a long-hold home, rates are unlikely to fall below your bought-down rate (refinancing would reset the clock), and paying them doesn't drain reserves you need.
Points lose for likely movers, likely refinancers (if rates drop enough to refinance, your points die with the old loan), and anyone trading emergency savings for a slightly smaller payment.
Points deserve suspicion when they appear on a quote you didn't ask for. If you are paying points and still quoted at or above the market median rate, the points are funding the lender's margin, not your rate — see the red flags in our offer-competitiveness guide.

Median figures ($2,602 in points among point-payers, 6.49% median rate, $335,000 median loan) computed from 2,706,510 first-lien 2025 purchase loans in public CFPB HMDA data — methodology. Historical closed loans, not today's pricing; the break-even math is timeless, the rates are not.

How to pressure-test a points quote in two calls

Ask your lender for the same loan quoted at zero points — this reveals the true exchange rate they are offering.
Ask a second lender for both versions. The rate-per-point trade varies between lenders more than headline rates do, and it is the least-shopped number in the mortgage.
Compute break-even on the difference, and be honest about your timeline — the national median homeowner moves well before year 15, and refinances cluster whenever rates dip.

Common questions

How much does one point lower my rate?

There is no fixed exchange rate — commonly around 0.25% per point, but it varies by lender, day, and loan profile, and it is rarely linear (the second point usually buys less than the first). That variability is exactly why the same rate buydown should be priced at more than one lender.

Are discount points tax deductible?

Often, yes — points on a purchase of a primary residence are generally deductible as prepaid interest, sometimes fully in the year paid if IRS conditions are met; refinance points typically deduct over the loan term. Whether this changes your break-even depends on whether you itemize. Confirm with a tax professional; this is the one part of the decision that is genuinely individual.

Is it better to use the cash for a bigger down payment instead?

Frequently — a larger down payment reduces the loan balance (saving interest at your note rate), can improve your loan-to-value pricing tier, and in some cases removes mortgage insurance sooner. Points only clearly beat a bigger down payment when you are confident you will hold the loan well past break-even.

What is the difference between discount points and an origination fee quoted in points?

Both are Section A charges expressed as a percentage of the loan, but discount points buy a lower rate while an origination fee buys nothing. On a Loan Estimate they appear as separate lines — a lender quoting "1 point" should be asked which kind it is.

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