What Are Mortgage Points and Are They Worth Buying?

Last updated September 2026

Quick answer

A mortgage point costs 1% of your loan amount and typically buys about a 0.25% rate reduction, though the exact amount varies by lender. On a $360,000 loan, one point costs $3,600 and saves about $58/month — a break-even around 5 years 2 months. Buy points only if you're confident you'll keep the loan past that point; move or refinance sooner, and you lose money on them.

The example we'll use throughout

Points bought	Cost	New rate	New payment	Monthly savings	Break-even
0 (baseline)	—	6.25%	$2,216.58	—	—
1	$3,600	6.00%	$2,158.51	$58.07	~62 months (5 yrs 2 mos)
2	$7,200	5.75%	$2,100.89	$115.69	~62 months (5 yrs 2 mos)

Notice the break-even barely moves between 1 and 2 points — when each point buys roughly the same rate reduction, the payback period stays roughly constant no matter how many you buy. What actually matters is whether you'll be in the loan long enough to clear it at all.

1 point cost: $360,000 × 1% = $3,600
Monthly savings: $2,216.58 − $2,158.51 = $58.07
Break-even: $3,600 ÷ $58.07 = 62.0 months

How the math works

Everything before month 62 is a net cost. Everything after is pure savings for as long as you keep the loan.

The mirror image: lender credits

Points work in reverse too. A lender credit (sometimes called negative points) means accepting a higher rate in exchange for money toward your closing costs — useful if you're short on cash today or plan to move or refinance again soon, since you're trading a future cost you may never pay (the extra interest) for cash you need right now.

Things to consider

The break-even only pays off if you keep the loan that long. If there's a real chance you'll move or refinance within the break-even window, points are a losing bet.
Points on a purchase may be fully deductible the year you pay them, if certain IRS conditions are met (points computed as a percentage, customary for your area, and not financed by the lender as part of the same transaction). Points paid on a refinance are typically deducted ratably over the loan's life instead. Confirm your situation with a tax professional.
The rate reduction per point isn't fixed. 0.25% is a common rule of thumb, but actual pricing varies by lender, loan program, and market conditions — always check the specific rate sheet, not a generic assumption.
Compare points against other uses of the same cash — a larger down payment, an emergency fund, or higher-interest debt may return more than a rate buydown, especially if your break-even horizon is uncertain.

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Frequently asked questions

How much does one mortgage point cost?

1% of your loan amount — $3,600 on a $360,000 loan, for example.

How much does a point typically reduce my rate?

Commonly around 0.25%, though the exact amount varies by lender, loan program, and market conditions. Always check your specific rate sheet rather than assuming a fixed number.

Are mortgage points tax deductible?

Points paid on a purchase of your primary residence are often fully deductible in the year paid, if certain IRS conditions are met. Points paid on a refinance are typically deducted ratably over the life of the loan instead. Consult a tax professional for your specific situation.

What are lender credits (negative points)?

The reverse of points — you accept a higher rate in exchange for a credit toward your closing costs. Useful if you're short on upfront cash or plan to move or refinance again soon.

When do points not make sense?

When you don't expect to keep the loan past the break-even point, or when the same cash would work harder elsewhere — a larger down payment, an emergency fund, or paying down higher-interest debt.

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When Should You Refinance Your Mortgage?

The break-even calculation, plus the reset-the-clock cost that can make a lower rate more expensive overall.

Mortgage Recast vs. Refinance: What's the Difference?

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Figures on this page are generated from the same amortization engine that powers the MortMetrix dashboard, using the example loan stated in each table. They are estimates based on a fixed-rate loan at a constant rate and are not your actual loan terms. This is educational information, not financial advice.