Are Mortgage Points Worth It?
"Buy the rate down" sounds like a deal — you pay a fee now for a lower rate forever. Whether it actually pays depends on one number: how long you keep the loan. Here's the honest math.
What a point buys
One discount point costs 1% of your loan amount and buys your note rate down by roughly an eighth to a quarter percent — the exact amount shifts with the market and is set by the lender's pricing table. On a $300,000 loan, a point is $3,000 upfront, and it might drop your rate from, say, 6.75% to 6.50%.
The break-even is the whole game
Divide what the points cost by what they save you each month, and you get the number of months to break even. If $3,000 in points saves $48/month, you break even at about 63 months — a little over five years. Keep the loan longer than that and the points win; sell or refinance sooner and you've simply donated the fee. Because the average mortgage is paid off (through a move or refi) well before 30 years, points pay off less often than the sales pitch suggests.
| $300,000 loan | No points | 1 point ($3,000) |
|---|---|---|
| Rate | 6.75% | 6.50% |
| Monthly P&I | $1,946 | $1,896 |
| Monthly saving | — | $50 |
| Break-even | — | ≈ 60 months |
Illustrative; the exact buydown per point is set by the lender's daily pricing. Keep the loan past ~5 years here and the point pays off — sell or refinance sooner and it doesn't.
Points, credits, and par
Pricing runs both ways. Pay points and the rate drops below par; take a higher rate and the lender can hand you a credit toward closing costs. Neither is free — you're trading cash now against cost later. The par rate, at zero points and zero credit, is the neutral middle, which is why RallyRates benchmarks it: a headline rate quoted "with points" looks lower than the market really is.
Run your own break-even
Don't take a lender's "it pays for itself" on faith — the break-even depends on your loan size, the exact buydown, and how long you'll stay. Compare a points quote against the par market, and use our free calculator to see the monthly difference each scenario makes.
Common questions
How much does one mortgage point cost?
One discount point is 1% of your loan amount, paid at closing — $3,000 on a $300,000 loan, $4,000 on $400,000, and so on.
How much does a point lower my rate?
Typically about an eighth to a quarter of a percent, but the exact amount is set by the lender's daily pricing table, not a fixed rule — always ask what a specific point actually buys.
How do I know if paying points is worth it?
Divide the cost of the points by the monthly payment they save to get your break-even in months. Keep the loan past that point and the points pay off; sell or refinance sooner and you've donated the fee.
What is a lender credit?
The mirror image of points: you accept a slightly higher rate and the lender credits money toward your closing costs. Useful when you're short on cash or don't expect to keep the loan long.
Are discount points tax-deductible?
Points paid to buy down the rate on a home purchase are often deductible, while points on a refinance are usually spread over the loan's life. Rules change — confirm current IRS guidance or ask a tax professional.
By L.W. Martin, Founder — 20 years in the mortgage business, including 15 running his own brokerage. About → · Updated September 2026.