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 — 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 — 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 — 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 — 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) ÷ (Monthly payment savings). If 2 points cost $7,000 and lower your payment by $90/month, break-even = $7,000 ÷ $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) — those are a different product with different math.