When should I pay discount points?

If your break-even period (typically 6-8 years per point) is less than your expected time in the home, points make sense. If you plan to move or refinance within 5 years, skip points.

How much rate does each point buy?

Typically 0.25% rate reduction per point (1% of loan). On a $400,000 mortgage at 7%, one point ($4,000) reduces rate to 6.75%, saving $66/month. Break-even: $4,000 / $66 = 60 months (5 years).

Are discount points tax-deductible?

Yes — points paid to buy down the rate on a primary residence purchase mortgage are fully deductible in the year paid. Refinance points must be deducted over the life of the loan.

Mortgage Points vs No Points Break-Even

Calculate the break-even period for paying discount points to reduce the mortgage rate. Determines if buying down the rate is worth the upfront cost.

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Frequently Asked Questions

When should I pay discount points?

How much rate does each point buy?

Are discount points tax-deductible?