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.

Principal ($)

Annual Rate (%)

Years

Compounding / Year

$ Finance Disclaimer: These calculators are for educational and illustrative purposes only. Results do not constitute financial advice. Consult a licensed financial advisor before making investment or borrowing decisions.

How to Use

Enter the values for the scenario you are assessing. 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. Use the points vs no points result to inform your calculation.

Related Calculators

Refinance Break-Even

Finance & Accounting

Origination Fee Cost

Finance & Accounting

Total Mortgage Interest

Finance & Accounting

Mortgage Points vs No Points Break-Even

How to Use

Related Calculators

Frequently Asked Questions

When should I pay discount points?

How much rate does each point buy?

Are discount points tax-deductible?