Understanding Mortgage Points
How mortgage discount points work, what one point costs, the break-even calculation, and when buying down your rate is worth it.
Last updated: 2026-07-23
When you take out a mortgage, the lender often offers to lower your interest rate in exchange for an upfront payment called discount points. It can save real money over the life of a loan — or waste cash you'll never earn back — depending entirely on your timeline.
What a point actually is
One discount point costs 1% of the loan amount and typically lowers your rate by about 0.25 percentage points, though the exact trade varies by lender. On a $300,000 loan, one point costs $3,000 and might drop your rate from 6.75% to 6.5%.
The break-even calculation
Points are worth it only if you keep the loan long enough for the monthly savings to repay the upfront cost. Divide what you paid for the points by the monthly payment reduction to find your break-even in months. If a point costs $3,000 and saves you $50 a month, you break even in 60 months — five years.
When points make sense
- You plan to stay in the home well past the break-even point.
- You have the cash to pay points without draining your emergency fund.
- You're not likely to refinance before you recoup the cost.
If you might sell or refinance within a few years, points rarely pay off — you'd give up the fee before the savings catch up. Don't confuse discount points with origination points, which are a lender fee that buys you nothing. Find your break-even with the calculators below.