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.

Rate without points
1 point = 1% of loan amount
Typically 0.20% to 0.25% per point

Cost Breakdown

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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.