Question 1

What is a mortgage discount point?

Accepted Answer

One point equals 1% of the loan amount paid upfront at closing to get a lower interest rate. One point typically reduces your rate by 0.125–0.25%, though the exact trade-off varies by lender and market conditions.

Question 2

How do I calculate the break-even for mortgage points?

Accepted Answer

Upfront cost of points divided by monthly payment savings equals the break-even month. If you plan to stay in the home longer than that break-even point, paying points is financially beneficial. If you'll move or refinance before then, the upfront cost isn't recovered.

Question 3

Are mortgage points tax deductible?

Accepted Answer

Generally yes — discount points are treated as prepaid mortgage interest and are typically deductible in the year paid on a primary residence purchase. Rules differ for refinances and second homes; verify with a tax professional.

Question 4

Should I always choose the lowest interest rate offered?

Accepted Answer

Not necessarily. A lower rate may require paying significant points, so the upfront cost must be recovered through monthly savings before the deal is net-positive. This calculator shows the break-even so you can compare lender offers honestly.

Question 5

What if I'm comparing multiple lender offers with different rates and points?

Accepted Answer

Compare them by break-even period — whichever combination of rate and upfront cost produces the lowest total cost by your expected move or refinance date is the better offer, not necessarily the one with the lowest rate or lowest closing cost.

Question 6

Is paying points worth it on a refinance?

Accepted Answer

Only if you plan to keep the loan long enough to reach the break-even. Since refinances are often followed by another refinance within a few years, high-point loans frequently don't clear their break-even before the next rate opportunity arises.

Should you pay points to get a lower rate?

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