Original article updated 2026-07-30. Retained for reference. Confirm current requirements with an appropriate provider or administering agency.
Direct answer
One discount point equals one percent of the loan amount. Paying discount points can reduce the offered interest rate, but the reduction varies by lender and loan. Compare otherwise similar offers, upfront costs and how long you expect to keep the loan; a simple break-even calculation is only one part of the comparison.
Calculate the break-even period
Divide the cost of the points by the monthly principal-and-interest savings. As a hypothetical example, if $3,000 in points lowers the payment by $60 per month, the simple break-even period is 50 months. This calculation does not include the time value of money, tax treatment, or opportunity cost, but it provides a useful first comparison. Ask the lender to show the same loan with zero points and with points.
When points may or may not fit
Points may fit a long ownership horizon, stable financing plan, and sufficient cash after closing. They may be less attractive if you expect to move, refinance soon, or need cash for reserves and repairs. Use the mortgage points planning guide, compare APR versus interest rate, and review mortgage rate quotes on the same day.
Frequently asked questions
Do points guarantee a specific rate reduction?
No. The rate change for each point varies by lender, market, loan type, and day. Compare written quotes rather than assuming a fixed reduction.
Are mortgage points tax deductible?
They may be in some situations, but tax treatment depends on the transaction and your circumstances. Ask a qualified tax professional.
Primary sources for this update
These specific statements were checked on November 11, 2026. Requirements can change; verify the rules for your own loan.