Discount points are fees you pay at closing to lower your interest rate. One point costs 1% of the loan amount and often lowers the rate by about 0.125 to 0.25 percentage points, though it varies by lender and market. Points pay off only if you keep the loan longer than the break-even point, often five to seven years.
How the math works
On a $350,000 loan, one point costs $3,500. If it lowers your rate from 6.75% to 6.5%, your payment drops by about $58 a month. $3,500 ÷ $58 is about 60 months, so you break even after roughly five years. Keep the loan longer and you come out ahead; sell or refinance sooner and you lose money.
Try it: Rate buydown break-evenEnter the cost of points and the rate reduction to see your break-even point and savings over time.When points make sense
- You expect to keep the loan for many years, past the break-even.
- You have extra cash after your down payment, closing costs and reserves.
- The seller is paying closing costs and you can use the credit for points; see seller concessions.
- Rates are already low, so a refinance is unlikely.
When to skip them
- You may move or refinance within a few years.
- Rates are high and you expect to refinance if they fall; you’d lose the money spent on points.
- The cash would leave you thin on reserves.
Lender credits: points in reverse
You can also take a slightly higher rate in exchange for a lender credit that pays part of your closing costs. That makes sense if cash is tight or you expect to refinance soon.
Points vs. a temporary buydown
Points lower your rate for the life of the loan. A 2-1 buydown lowers it for the first two years only, usually paid by the seller or builder. A buydown helps your early budget; points help if you’ll keep the loan a long time.
Compare offers carefully
Lenders quote rates with different numbers of points, which makes rates hard to compare. Look at Section A of each Loan Estimate, where points appear, and compare the full cost with compare mortgage offers. Points paid to buy down the rate on a home purchase may be tax-deductible; ask a tax professional.
Common questions
How much does one mortgage point lower the rate?
Often about 0.125 to 0.25 percentage points, but it varies by lender and market.
Are mortgage points worth it?
Only if you keep the loan past the break-even point, commonly five to seven years.
Can the seller pay for points?
Yes. Seller concessions can be used for discount points, within your loan’s concession limit.
Updated October 2026. Educational content. OfferBacked is not currently a lender and doesn’t issue pre-approvals or loans.