The Complete Guide to US Mortgage Points: Are They Worth It?

When you sit down to sign your mortgage papers, your lender might ask if you want to "buy points" to lower your interest rate. For many homebuyers, this is a confusing decision that involves handing over thousands of dollars upfront. Here is exactly what mortgage points are and how to calculate if they are worth buying.

What Are Mortgage Points?

Mortgage points (often called discount points) are fees you pay directly to the lender at closing in exchange for a reduced interest rate. This is also known as "buying down the rate."

Typically, one point costs 1% of your total loan amount. So, if you are taking out a $300,000 mortgage, one point will cost you $3,000 upfront. In exchange, the lender will usually reduce your interest rate by about 0.25%.

The "Breakeven" Calculation

The entire concept of buying points revolves around the breakeven point. This is the number of months it will take for your monthly savings to equal the upfront cost of the points. If you plan to sell the house or refinance before you hit the breakeven point, buying points is a terrible financial decision.

Example: Let's say you take out a $300,000 loan. You buy 1 point for $3,000, which lowers your rate and saves you $50 per month on your mortgage payment.

To find the breakeven point, divide the cost by the savings: $3,000 / $50 = 60 months (5 years).

If you stay in the home and keep that mortgage for 10 years, you made a great investment! If you move or refinance after 3 years, you lost money.

Should You Buy Points in 2026?

With interest rates fluctuating, the decision depends entirely on your long-term plans.

  • Yes, buy points if: You are buying your "forever home" and plan to keep the mortgage for 10+ years without refinancing. The long-term savings will be massive.
  • No, skip the points if: You expect to move in the next 3-5 years, or if you believe interest rates will drop soon, allowing you to refinance to a lower rate anyway.

To do the exact math for your situation, use our Mortgage Points Calculator to see your exact breakeven timeline.