Buying mortgage points means **paying money upfront to permanently lower your interest rate** — typically one point costs 1% of your loan amount ([learn more about what is private mortgage fund? mortgage lender overview | rateroots](/library/what-is-private-mortgage-fund-mortgage-lender-overview-rateroots)) ([learn more about can i get a mortgage with 600 credit score?](/library/can-i-get-a-mortgage-with-600-credit-score)) ([learn more about can i get a mortgage with 500 credit score?](/library/can-i-get-a-mortgage-with-500-credit-score)) ([learn more about small business grants: complete guide to free funding opportunities](/library/small-business-grants-complete-guide-to-free-funding-opportunities)) and lowers your rate by about 0.25%. In 2026's elevated-rate environment, points can be worth it **if you'll keep the loan past your break-even point** (usually 4–7 years), and a poor choice if you'll sell or refinance sooner. Here's how to run the math before you sign ([learn more about what is lot lending? mortgage lender overview | rateroots](/library/what-is-lot-lending-mortgage-lender-overview-rateroots)) ([learn more about what is archway fund? mortgage lender overview | rateroots](/library/what-is-archway-fund-mortgage-lender-overview-rateroots)).
## What "Points" Actually Means
There are two different things lenders call points:
- **Discount points** lower your interest rate. One point = 1% of the loan, bought to reduce the rate.
- **Origination points** are a lender fee for processing the loan and do *not* lower your rate.
This guide is about **discount points** — the kind you buy to reduce your rate. On a $400,000 loan, one point costs $4,000.
## How Much One Point Lowers Your Rate
The common rule of thumb is that **one point lowers your rate by about 0.25%**, but the real number varies by lender, loan type, and market conditions — sometimes it's 0.125%, sometimes 0.375%. Always ask the lender for the *exact* rate at zero points, one point, and two points so you can compare on real numbers, not the rule of thumb.
## The Break-Even Calculation (The Only Number That Matters)
The decision comes down to break-even: how long it takes for your monthly savings to repay the upfront cost.
**Break-even (months) = Cost of points ÷ Monthly payment savings**
Example on a $400,000 loan:
- One point costs **$4,000**
- It lowers your payment by roughly **$60/month**
- Break-even = $4,000 ÷ $60 ≈ **67 months (about 5.5 years)**
If you keep the loan longer than the break-even, the points pay off. If you sell or refinance before then, you lose money.
## When Buying Points Is Worth It
Points make sense when several of these are true:
1. **You'll stay in the home long-term** — well past your break-even point.
2. **You don't expect to refinance soon** — if rates are likely to fall and you'll refinance, you'd waste the upfront cost.
3. **You have cash beyond your down payment and reserves** — never drain your emergency fund to buy points.
4. **The break-even is comfortably shorter than your expected time in the loan.**
## When to Skip Points
Avoid points when:
- You might sell or refinance within a few years.
- You're tight on cash and the money is better used on the down payment or reserves.
- A larger down payment would deliver more value (e.g., removing PMI).
- Rates are expected to drop and refinancing is likely.
## Points vs. a Bigger Down Payment
If you have extra cash, compare two uses: buying points versus putting more down. A bigger down payment can eliminate private mortgage insurance, lower your total interest, and reduce your loan balance — sometimes a better return than rate points. Run both scenarios; the winner depends on your PMI situation and how long you'll keep the loan.
## Temporary Buydowns Are Different
Watch the terminology. A **permanent buydown** (discount points) lowers your rate for the life of the loan. A **temporary buydown** like a 2-1 buydown lowers your rate only for the first year or two, then it rises to the note rate. Temporary buydowns — often seller-paid — help with early affordability but don't change your long-term rate. Don't confuse the two when comparing offers.
## A Simple Decision Checklist
Before buying points, confirm:
- You've gotten the exact rate at 0, 1, and 2 points from the lender.
- You've calculated your specific break-even in months.
- You plan to keep the loan well beyond that break-even.
- Buying points won't compromise your down payment or emergency reserves.
- You've compared it against a larger down payment.
## The Bottom Line
Mortgage points are a bet that you'll keep your loan long enough for the upfront cost to pay off. In 2026, with rates elevated and many borrowers expecting future refinancing, run your **personal break-even** before committing. If you'll stay put for the long haul and have the cash to spare, points can save real money. If your plans are uncertain, keep the cash.
*This article is for educational purposes and is not financial advice. Loan terms, rates, and point pricing vary by lender and borrower; consult a licensed mortgage professional for your situation.*
