Discount Points Cost Calculator
Calculate the true cost of buying mortgage discount points and see whether the lifetime interest savings beat keeping that cash invested. Based on 2026 mortgage rates and CFPB guidance.
Cost Breakdown
What Are Mortgage Discount Points?
Mortgage discount points are upfront fees paid to your lender at closing in exchange for a lower interest rate over the life of the loan. One point equals 1% of the loan amount — so on a $400,000 mortgage, one point costs $4,000. Each point typically reduces your rate by 0.20% to 0.25%, though this varies by lender and market conditions. Points are also called "buying down the rate" (source: Consumer Financial Protection Bureau, cfpb.gov).
Are Points Worth It in 2026?
Points only pay off if you keep the loan past the break-even month — when cumulative interest savings equal the upfront cost. The median U.S. homeowner moves every 8.0 years (Redfin 2025 data), so any break-even past 84 months usually means buying points loses money. With 30-year fixed rates averaging 6.50% to 7.00% in early 2026 (Freddie Mac PMMS), 1 point typically buys a 0.25% rate reduction — that's a break-even around 5 to 7 years on most loan sizes. Refinancing or selling before that wastes the entire upfront cost.
Points vs Investing the Same Cash
Buying 2 points on a $400,000 loan costs $8,000. That same cash invested in a high-yield savings account at 4.5% APY earns roughly $360 per year, or in a S&P 500 index fund averaging 7% real returns earns about $560 per year. If your monthly mortgage savings from points are less than what the cash would earn elsewhere, points are the wrong move. Tax-deductible mortgage interest (if you itemize) can change the math — points themselves are deductible in the year paid for primary residence purchases (source: IRS Publication 936).
When Discount Points Make Sense
Points work best when you plan to stay in the home long-term (10+ years), the rate environment is high (above 6.5%), you have surplus cash that wouldn't earn more elsewhere, and you can deduct the points on your tax return. Points work poorly when rates are likely to drop within 3 to 5 years (refinance risk), you might relocate, or you're already stretched on closing costs. Last updated: April 2026.
Frequently Asked Questions
How much does 1 mortgage point cost?
One discount point equals 1% of your loan amount. On a $400,000 mortgage, 1 point costs $4,000 paid at closing. The rate reduction per point is usually 0.20% to 0.25% (source: cfpb.gov).
What is the break-even point on mortgage points?
The break-even is the month when your cumulative interest savings equal the upfront cost of the points. Most break-evens fall between 4 and 7 years. If you sell or refinance before break-even, you lose money on the points.
Are mortgage points tax deductible?
Yes, points paid on a primary residence purchase are generally fully deductible in the year paid if you itemize on Schedule A. Points on a refinance must be deducted ratably over the life of the loan (source: IRS Publication 936).
How much does buying points lower my interest rate?
Each point typically reduces your rate by 0.20% to 0.25%. Some lenders offer larger reductions on certain loan products. Always ask for a written rate sheet showing the exact reduction per point before paying.
Should I buy points or put more money down?
It depends on your time horizon. Points reduce your rate but only pay off if you keep the loan long enough. A larger down payment reduces the loan amount permanently and avoids PMI sooner. Use this calculator's break-even output to compare.
Can I negotiate discount points?
Yes. Points are part of your loan pricing and can be negotiated. Get rate quotes from at least 3 lenders and compare the same loan amount with the same points to see who offers the best total cost.
Is this calculator free and private?
Yes. All calculations run in your browser. No data is sent to any server, stored anywhere, or shared. No sign-up required.