Buy-Down Points Break-Even
Points: each 1% point upfront ≈ 0.25% rate reduction. Break-even = points cost / monthly savings. Worth it if holding 5+ years.
| Loan | — |
| Rate w/o points | — |
| Rate w/ points | — |
| Points cost | — |
| Payment w/o points | — |
| Payment w/ points | — |
| Monthly savings | — |
| Break-even | — |
| Hold period | — |
| Total savings over hold | — |
| Net benefit | — |
| Winner | — |
Mortgage discount points let you buy down your interest rate. Each point (1% of loan) typically reduces rate by 0.25%. Worth it if you'll hold the loan past the break-even point — usually 4-7 years. Less worth it for short-term holds.
How Points Work
Pay 1% upfront (e.g., $3,500 on $350K loan) to reduce rate by 0.25%. Two-point cost = 2% upfront ($7K) for 0.5% rate reduction. Some lenders offer fractional points (0.125% reduction per 0.5% point). Negotiate at closing — many lenders flex.
Break-Even Analysis
Break-even months = points cost ÷ monthly savings. Typically 4-7 years. Plan to keep loan past break-even for true benefit. Sell or refi before? You've lost money. After? You've gained for life of loan or until you refi/sell.
Tax Deductibility
Points on PRIMARY home purchase: fully deductible in year paid (IRC 461(g)(2)). Points on refinance: amortize over loan term. Investment property: amortize. Always confirm with tax pro and Form 1098 lender reporting.
Last updated May 2026. Sources: CFPB Mortgage Points.