Buying Discount Points vs. No Points
Discount points let borrowers pay an upfront fee to reduce their interest rate, trading a larger closing cost for a lower monthly payment over time — a decision that depends heavily on how long you plan to keep the loan.
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Buying Discount Points
The borrower pays an upfront fee at closing in exchange for a reduced interest rate for the life of the loan.
- Reduces the interest rate and monthly payment for the life of the loan
- Can result in significant interest savings if you keep the loan long enough to break even
- Requires more cash at closing upfront
- Only pays off if you keep the loan past the break-even point
No Points (Standard Rate)
The borrower takes the lender's standard offered rate without paying any upfront points to reduce it.
- Lower cash required at closing
- Simpler to compare across lenders without factoring in points
- Higher ongoing interest rate and monthly payment than if points were purchased
Which one makes sense for you?
Buying points can make sense for borrowers confident they'll keep the loan well past the break-even point and who have the extra cash available at closing. If you're likely to sell or refinance sooner, or need to preserve cash for closing and reserves, taking the standard rate without points is usually the more practical choice.
Key cost factors.
- How long you realistically plan to keep the loan before selling or refinancing
- Available cash for closing versus preserving it for other uses
- The specific break-even timeline offered for buying points on your loan
- Whether current rates make buying down a rate especially attractive
Before you decide.
- What's the exact break-even point in months for buying these points?
- How does buying points affect my total cash needed at closing?
- Do I have a realistic expectation of keeping this loan past the break-even point?
Frequently asked questions.
Are discount points tax deductible?
Mortgage points can sometimes be deductible, subject to various conditions and limits that can change over time, so it's worth checking with a tax professional about your specific situation rather than assuming.
All figures on this page are illustrative examples for general education, not quotes, appraisals, or guarantees of actual pricing. Actual costs vary by provider, location, project scope, and market conditions — always get a specific quote before making a purchasing decision.
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