A mortgage discount point costs 1% of your loan amount and typically reduces your interest rate by 0.25%. On a $320,000 loan, one point costs $3,200 upfront and might drop your rate from 6.75% to 6.50%. That saves you about $52 per month. Is it worth it? That depends entirely on how long you keep the loan.
The math is straightforward. Divide the cost of the points by the monthly savings to find your breakeven month.
Example: $3,200 cost ÷ $52/month savings = 61.5 months, or just over 5 years. If you stay in the home longer than 5 years, the points save you money. If you sell or refinance sooner, you lost money.
This is the simplified version. The real calculation is more nuanced because it should account for the opportunity cost of that $3,200 (what you'd earn if you invested it instead), the tax deductibility of points in year one versus amortized over the loan, and the time value of money — saving $52/month starting five years from now is worth less than $52 today.
Points are a good deal when you're confident you'll stay in the home for significantly longer than the breakeven period. If breakeven is 5 years and you're planning to stay 15-20 years, the savings compound meaningfully — potentially $10,000-15,000 over the life of the loan.
They also make sense when rates are high and you expect to keep the mortgage (not refinance). If you buy points today at 6.75% and rates drop to 5.5% next year, you'd likely refinance and lose the benefit of the points you paid.
If you're planning to move within 5-7 years — which is the average tenure for U.S. homeowners — points are usually a losing bet. You're paying $3,200 upfront to save $52/month, but you'll only collect 60-84 months of savings before selling. After accounting for opportunity cost, you're roughly breaking even or slightly behind.
Points also don't make sense if the upfront cost stretches your cash reserves thin. Having $3,200 less in savings after closing means less cushion for unexpected repairs, job changes, or other emergencies. Liquidity has real value that the simple breakeven calculation doesn't capture.
Here's what most articles miss: that $3,200 invested at 7% annual return would grow to about $4,490 after 5 years. So the true breakeven isn't just "when do my monthly savings add up to $3,200?" — it's "when do my monthly savings exceed what I'd have if I'd invested the $3,200 instead?" This pushes the true breakeven out by another 6-12 months beyond the simple calculation.
Each additional point has diminishing returns. The first point might buy you 0.25% off your rate, but the second point might only get you another 0.125-0.25%. The more points you buy, the longer your breakeven period. Unless you're absolutely certain you'll keep this mortgage for 10+ years, one point is the maximum worth considering.
See exactly how points affect your total cost at any time horizon. Enter the rate your lender quoted with and without points.
Compare mortgages free →Buying points is a bet on staying put. If you're highly confident you'll keep this mortgage for 7+ years, one point can save you thousands. If there's any chance you'll move or refinance within 5 years, skip the points and keep your cash. When in doubt, don't buy points — you can always make extra principal payments later, but you can't get point money back if you sell early.