Walk into any lender's office and you'll hear the same pitch: pay a little extra upfront, shave your rate, save tens of thousands over 30 years.
It usually isn't, and the fine print knows it.
Mortgage points, sometimes called discount points, are prepaid interest.
One point costs 1% of your loan amount and typically knocks your interest rate down by about 0.25%.
On a $400,000 loan, one point runs you $4,000.
Buy two points and you're handing over $8,000 at closing for a slightly smaller monthly bill.
Here's the part lenders gloss over: you have to stay in the house long enough to earn that money back.
That's called the breakeven period, and it's often six to eight years, sometimes longer depending on your rate and tax situation.
Sell, refinance, or move before then and you've basically donated that cash to the bank.
A $400,000 loan at 7% costs about $2,661 a month in principal and interest.
Buy one point to drop it to 6.75%, and the payment falls to roughly $2,594 — a savings of about $67 a month.
Divide your $4,000 by $67 and you're looking at nearly 60 months, or five years, just to get back to even.
It ignores what else that $4,000 could do.
Parked in a high-yield savings account at 4%, it earns roughly $160 a year without locking you into anything.
Used to pay down the loan principal directly, it cuts your balance immediately.
Put toward closing costs, it keeps more cash in your pocket for the leaky water heater that's definitely coming.
Then there's the tax angle, which gets oversold.
Points on a home purchase are often deductible in the year you pay them, but only if you itemize — and after the 2017 tax law raised the standard deduction, most households don't.
If you're taking the standard deduction, that "tax benefit" is worth exactly nothing to you.
People with a very long time horizon and no plans to move: think someone buying a forever home in their 40s with a stable job.
They might clear the breakeven hurdle and come out ahead.
Everyone else is mostly buying peace of mind, which is a real thing but an expensive one.
There's also a quieter strategy that often beats points outright: shopping multiple lenders and negotiating.
A single rate quote isn't a market price, it's an opening offer.
Getting three or four quotes and pitting them against each other can shave a quarter point off your rate for free — no upfront check required.
Watch for lenders bundling points into "no-cost" or "low-cost" loan offers too.
Those deals usually come with a higher rate baked in, and the costs get recouped through years of slightly bigger payments.
Before you sign anything, ask your loan officer for a written breakeven calculation based on your actual numbers, not a generic chart.
If they can't or won't produce one, that tells you something.
The honest take: points are a bet that you'll stay put and rates won't drop enough to make refinancing worthwhile.
Often it just pads the lender's bottom line while you wait years to break even.
Final Thoughts
Ask who benefits from the recommendation before you write the check.