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What Are Mortgage Points (and Should You Pay for Them)?

When you’re shopping for a mortgage, you might hear the term “mortgage points”—also known as discount points. But what are they, and should you consider paying for them?

Let’s break it down.

Mortgage Points Explained

Mortgage points are optional fees you can pay your lender to reduce your interest rate. This is commonly called “buying down the rate.”

Be cautious when browsing online mortgage rates—some advertised rates already include discount points. Look for the lender’s true base rate to compare apples to apples.

 Note: Some lenders also refer to “origination fees” as points, but those are different. Origination fees cover loan processing and aren’t optional like discount points.

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How Much Do Points Lower Your Rate?

Generally, 1 point = 1% of your loan amount, and it typically reduces your interest rate by about 0.25%. But this can vary depending on the lender, loan type, and current market conditions.

For example:

• 1 point on a $300,000 loan = $3,000
• It might reduce your rate from 7% to 6.75%
• You could also buy half a point or even more than one point

Each lender sets their own pricing, so be sure to shop around.

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Do Points Really Save You Money?

Let’s look at a quick comparison on a $300,000 loan with a 30-year term and a base rate of 7%:

Points	Cost	Monthly Payment	Savings	Break-Even
0	$0	$1,996	—	—
1	$3,000	$1,946	$50/mo	60 months
2	$6,000	$1,896	$100/mo	60 months

You start saving once you pass the break-even point—when your monthly savings equal what you paid upfront.

If you think you’ll stay in the home past that point, it might be worth it.

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Other Key Questions

Can I negotiate discount points?
Yes. Some lenders may include points in your quote without asking. Be sure to request a version with zero points so you can compare offers fairly.

Can I buy points after closing?
No. All terms are finalized at closing.

Can the seller pay my points?
Yes, especially in a buyer’s market. This can reduce your rate without costing you a dime.

Are points tax deductible?
In many cases, yes—if you itemize deductions. Seller-paid points may also be deductible. Talk to a tax advisor to see what applies to you.

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Let’s Talk About Your Best Rate

Not sure if mortgage points are right for you? Our Loan Zone officers are here to help you run the numbers and make the smartest decision for your budget and goals.

 Call us at (888) 696-4462 to schedule your appointment today.