Mortgage Points Buydown Calculator
Find out if buying discount points to lower your mortgage rate pays off given how long you plan to stay. See the break-even month.
What Are Mortgage Discount Points?
Discount points are upfront fees paid to the lender to permanently lower your mortgage interest rate. One point equals 1% of the loan amount — so on a $350,000 loan, one point costs $3,500. Each point typically lowers the rate by about 0.25%, though the exact savings vary by lender and loan type. Source: Consumer Financial Protection Bureau (cfpb.gov). Last updated: May 2026.
When Buying Points Makes Sense
Points pay off when (1) you'll keep the loan past the break-even month — typically 60-100 months, (2) the cash going into points isn't needed for higher-return uses (paying high-interest debt, emergency fund, retirement match), and (3) you're paying with cash that's already taxed (points paid on a home purchase are tax-deductible in the year paid if you itemize, per IRS Publication 936).
Common Mistakes With Mortgage Points
The most common mistake is buying points when you'll refinance or move within 4-5 years — you don't recover the upfront cost. Another mistake: comparing points to a sunk cost rather than alternatives. If $7,000 in points saves $80/month for 30 years, that's a 13.7% effective return on the $7,000 — but only if you keep the loan. If you'd otherwise use the $7,000 to invest in an S&P 500 index averaging 10%, points still win — but barely.
Negative Points (Lender Credits) Explained
Some lenders offer 'negative points' — you accept a slightly higher rate in exchange for a credit toward closing costs. This is the opposite math: if you'll only keep the loan a short time, accepting a higher rate to avoid out-of-pocket closing costs can be the better deal. Run both scenarios before locking your rate.
Frequently Asked Questions
How much does one mortgage point lower the rate?
Typically 0.25%, but it varies by lender and market conditions. In May 2026, with 30-year rates near 6.85%, one point usually buys the rate down to about 6.60%. Some lenders offer steeper or shallower buydowns \u2014 always ask for the par rate (no points) plus 1, 2, and 3-point quotes to see your actual options.
Are mortgage points tax-deductible?
Points paid on the purchase of your primary home are deductible in the year paid if you itemize (IRS Publication 936). Points paid on a refinance must be deducted over the life of the loan (proportionally each year). Most homeowners take the standard deduction so this benefit is irrelevant \u2014 only the ~13% who itemize gain from it.
Should I buy points or make a larger down payment?
If you're below 20% down and would otherwise pay PMI, prioritize getting to 20% down first \u2014 that eliminates PMI immediately. If you're already at 20%+, the choice depends on how long you'll stay. Long-term stay favors points; short-term favors larger down payment (which reduces total interest by reducing the principal balance).
Can the seller pay for my points?
Yes. Seller-paid points are a common closing-cost concession. The buyer benefits from the lower rate without paying upfront \u2014 this is one of the most underused negotiating chips in slow markets. Conventional loans cap seller concessions at 3% with under 10% down, 6% with 10-25% down, and 9% with 25%+ down.
What is the break-even calculation for mortgage points?
Break-even = (Cost of points) \u00f7 (Monthly payment savings). If 2 points cost $7,000 and lower your payment by $90/month, break-even = $7,000 \u00f7 $90 = 78 months (6.5 years). Stay past month 78 to come out ahead.
Do points lower the rate forever or just for a year?
Permanent discount points (the standard product) lower the rate for the entire loan term. Don't confuse them with 2-1 buydowns (temporary 2% lower rate in year 1, 1% lower in year 2, then full rate) \u2014 those are a different product with different math.