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Pay now or pay later?
Loan amount, both rate quotes, the points, and how long you’ll keep the loan — the full head-to-head.
X VS Y COMPARISON · MONEY
Mortgage Points vs No Points
One discount point costs 1%% of your loan and typically buys your rate down about 0.25%% — prepaid interest that only pays off if you keep the loan long enough. The whole decision is one division problem: point cost ÷ monthly savings = break-even months. Enter your quotes and this calculator runs it, then shows the true cost over your hold including the equity you keep.
What the comparison shows
On a $400,000 loan at 6.75% with no points vs 6.50% with 1.0 point ($4,000), the payments are $2,594/mo and $2,528/mo — a $66.12 monthly saving. The break-even is 60 months (5.0 years): stay longer than that and the points start paying you back. Over a 10-year hold, the honest total cost — payments plus the points cost plus the remaining balance, because the lower rate also leaves you owing less — comes out $6,034 in favor of buying points. Kept the full 30 years, the point would save $19,803 lifetime.
Output · formula · meaning
| Output | Formula | What it means |
|---|---|---|
| Monthly savings | payment @ rate0 − payment @ rate1 | What the lower rate is worth each month: $66.12 here. |
| Break-even | points cost ÷ monthly savings | The only number that matters: 60 months. Leave before it and the points lose money. |
| Total cost over your hold | payments + points + remaining balance | The honest comparison, including the equity the lower rate builds: $6,034 apart over 10 years. |
| Lifetime savings | monthly savings × 360 − points cost | If you never move and never refinance: $19,803 of pure profit on the point. |
Who uses this
- Forever-home buyers: a 10-plus-year hold turns one point into roughly five figures of savings — run your actual quotes to confirm.
- Closing-table negotiators: sellers can fund your points (up to 6% of the price on a conventional loan) — a lower rate at zero cost to you is the best case.
- Rate-watchers: if you expect to refinance when the Fed cuts, points are usually a trap — the refi resets the break-even clock and the old points are gone.
- Cash-strapped buyers: if the points money would get you to 20% down and kill PMI, the down payment almost always wins over points.
Accuracy & limitations
One point typically buys about 0.25% off the rate in 2026, but the exact buy-down runs 0.125% to 0.375% depending on lender, loan program, and the day’s pricing — always use the rates on your own Loan Estimate, not the default. The simple break-even also ignores what the cash could earn elsewhere: if your $4,000 would earn 4% in savings, the break-even stretches about 7 months further. Points on a purchase are generally deductible as prepaid interest the year you close if you itemize (2026 standard deduction: $32,200 married filing jointly, $16,100 single); points on a refinance must be spread over the loan’s life. Discount points are not origination points — origination fees don’t lower your rate. This model amortizes a 30-year fixed loan, holds taxes, insurance, and PMI out of the comparison, and assumes you keep the exact loan until your exit year.
Cite this calculatorBright Side Kit. “Mortgage Points vs No Points.” brightoolbox.com, 2026.
Bright Side Kit. "Mortgage Points vs No Points." https://brightoolbox.com/mortgage-points-vs-no-points/ Accessed October 22, 2026.Frequently asked questions
How much does one mortgage point lower your rate?
About 0.25%% per point on most conventional loans in 2026, though 0.125%% to 0.375%% is possible depending on the lender and market. On a $400,000 loan, one point costs $4,000 and typically takes a 6.75%% rate to about 6.50%%, saving roughly $66 a month. Always confirm the exact buy-down on your Loan Estimate.
How do I calculate the break-even point on mortgage points?
Divide what you pay by what you save each month. Paying $4,000 for a point that saves $66 a month gives a break-even of about 61 months — just over 5 years. Every month you keep the loan past that is pure savings; sell, refinance, or pay off before it and you’ve lost money.
Are mortgage points worth it if I might refinance?
Usually not. A refinance replaces the old loan, which resets the break-even clock — the points you paid on the first loan are largely gone. If there’s a realistic chance you’ll refinance within your break-even window (say, because rate cuts are expected), skip the points and capture the lower rate on the refi instead.
Is it better to buy points or make a bigger down payment?
If the cash would take you from under 80%% loan-to-value to 80%% and eliminate PMI, the bigger down payment almost always wins — PMI savings have no break-even period. Above 80%% LTV, run the break-even on the points against how long you expect to keep the loan.
Are mortgage points tax deductible?
Generally yes: points are prepaid interest. Points on a purchase are usually deductible in full the year you close, if you itemize. Points on a refinance must be spread over the loan’s life. With the 2026 standard deduction at $32,200 (married filing jointly) and $16,100 (single), many buyers don’t itemize — confirm the benefit with a tax professional.