Mortgage Discount Points Break-Even Calculator

Discount points are upfront mortgage interest that buys down your rate. Each point costs 1% of the loan and typically cuts the rate by 0.25% in 2026 lender pricing. The break-even is the number of months you must keep the loan for monthly savings to exceed the points cost. Discount points on primary-residence purchase loans are tax-deductible in the year paid, which accelerates the effective break-even significantly.

2026 Lender Pricing for Points

Most 2026 lenders price points at 0.25% rate reduction per point (1% of loan). Some aggressive lenders offer 0.30% per point on specific products. Some discount lenders only offer 0.20% per point. The pricing varies daily with the rate market — when MBS spreads are wide, points produce more rate reduction. When spreads are tight, points produce less. Always get a current quote in writing. The buydown is most efficient at the first 1-2 points; deeper buydowns (3+ points) often yield diminishing returns and may not be worth the upfront cost.

Tax Deduction Math

For primary-residence purchase loans, discount points are typically deductible in the year paid as mortgage interest (not amortized over the loan term). At a 24% marginal tax rate, $8,000 in points actually costs $6,080 after the tax deduction — accelerating break-even by 24%. For refinance loans and investment property loans, points must be amortized over the loan term, so the year-one tax benefit is much smaller. The IRS rules: deduction requires the loan to be on a primary or second home, the loan to be secured by the home, points to be 'reasonable' for your area, and you must itemize. Consult a tax pro for specifics.

Last updated May 2026. Sources: CFPB Discount Points.