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Decide whether buying mortgage points is worth it. Each point costs 1% of the loan and typically reduces your rate by 0.25%.
| Points | Cost | Rate | Payment | Break-even |
|---|---|---|---|---|
| 0 | $0.00 | 7.00% | $2,661.21 | — |
| 1 | $4,000.00 | 6.75% | $2,594.39 | 60 mo |
| 2 | $8,000.00 | 6.50% | $2,528.27 | 61 mo |
| 3 | $12,000.00 | 6.25% | $2,462.87 | 61 mo |
Cost of points = loan × points × 1%. New rate = current rate − (points × reduction per point). We then amortize the same loan at the new rate to find the new monthly P&I, and divide the upfront cost by the monthly savings to get the break-even month.
A fee paid at closing to permanently lower your interest rate. One point equals 1% of the loan amount and typically buys a 0.25% rate reduction.
Only if you'll keep the mortgage past the break-even month. Sell or refinance earlier and you lose money on the points.
On a primary residence purchase, points are generally deductible the year you pay them. On a refinance, you must amortize them over the loan term.
Yes — the 0.25% reduction is typical but varies by lender and market. Always shop quotes with the same points scenario.
Extra down payment reduces the loan and PMI; points only reduce the rate. Compare both break-evens before deciding.
Results are estimates for educational purposes only and are not financial advice. Verify with a qualified professional before making decisions.
Last updated October 2026