Are Mortgage Points Worth It? Calculator & Detailed Guide

Adam Langsner

Jun. 1, 2025

I made this mortgage points calculator to clearly see how many months it takes to break even and start saving on a home loan. Below, I wrote a detailed guide that explains everything you need to know about mortgage points, so you can make the right decision for your family.

Calculator

Change the inputs below and the graph and customized explanation will automatically update to show you how much money in interest you'll pay with and without mortgage points. The bars in the graph show how much money mortgage points will cost you year over year. The red bars show how you spend more money upfront to buy the points, and the green bars show how you end up saving money later on.

What are Mortgage Points?

Mortgage points are a deal you strike with your lender: you pay more money upfront in closing costs in exchange for a lower interest rate on your mortgage. Think of it like buying ground beef in bulk at Costco—you spend more at the start, but you save over time because the cost per ounce (or in this case, per dollar borrowed) goes down.

For example, say you take out a $100,000 mortgage for 30 years at a 6% interest rate. If you stick with that rate and make regular payments, you'll pay $115,838 in interest over the life of the loan. But if you buy mortgage points, you'll essentially prepay some of that interest at closing to reduce how much you'll owe later. This can lead to significant savings over time, but not always.

Just like buying too much meat in bulk isn't always good idea (it can go bad before you have a chance to eat all of it), buying mortgage points isn't always a surefire way to save money. You need to know how many years until you break even on the points, how long you plan to live in the house and a few other things we'll get into below.

Understanding the Break Even Point

The break-even point is just what it sounds like—it's the moment when the money you've saved from your lower interest rate equals the amount you paid upfront for the mortgage points to get that lower rate.

Since you're paying more now to save more later, you'll initially be in the red—you've spent more than you've saved. But once you cross the break-even point and move into the later years of the mortgage, the savings start to outweigh the upfront cost—your investment begins to pay off. The main question to ask yourself is: "Do I plan to keep this mortgage long enough to reach that break-even point?" There's a lot to consider when answering that question and other factors that can make buying mortgage points worth it or not worth it.

When are Mortgage Points Not Worth It?

There's many situations where buying mortgage points isn't a good deal. Here's a few scenarios to consider:

1. You plan to sell before reaching the break-even point. Maybe you're buying a starter home that your family will outgrow in a few years. If the break-even point on the mortgage points is 8 years, but you expect to sell the home in 7, then buying points won't pay off.
2. You expect to refinance before the break-even point. If interest rates go down significantly, you'd probably refinance your mortgage to get a lower rate. It's anyone's guess whether interest rates will go up or down in the, but if you think there's a good chance you'll refinance before hitting that break-even point, buying points likely won't be worth it.
3. You plan to pay off your mortgage early. Maybe you're aiming to pay extra toward your mortgage each month to pay down the principal faster. While this strategy cuts down on total interest paid, it also reduces the potential savings from buying points. In this case, the benefit of points might shrink from thousands of dollars to just a few hundred—or they might not save you anything at all.

When are Mortgage Points Worth It?

Mortgage points are usually worth it if you plan to keep the loan past the break-even point and you don't intend to pay off your mortgage early by throwing extra money to pay down the principal each month. In this case, points can save you money over the long run and have the added benefit of lowering your monthly payment.

Other Considerations

One critical question you should ask yourself before buying mortgage points is: "What else could I do with this money? If you have the funds to purchase points, it’s worth considering whether those dollars could serve you and your family better elsewhere. Here are a few alternatives:

1. Increase Your Down Payment Rather than reducing your interest rate, you could reduce your loan amount. For example, if you're taking out a $100,000 loan and considering buying $2,000 in points, you could instead apply that $2,000 to your down payment to lower your loan amount to $98,000. While mortgage points may save you more over the long term, a larger down payment may be the smarter choice if you plan to move, refinance or payoff your mortgage before the break-even point.
2. Save the Money Putting those funds in a high-yield savings account gives you liquidity—the ability to access your money at any time. If you buy points instead, that money is gone and you’ll only see the benefit after the break-even point. If you need cash for an emergency, you can’t “undo” the points purchase. A high-yield savings account also lets you earn money without risk on those funds. You’ll typically earn less than you would if you bought the points and waited until that break-even point, but again you’ll have that liquidity.
3. Invest the Money Investing could offer higher returns than mortgage points or a high-yield savings account and you’ll typically have liquidity just like savings, but it does come with some risk. Depending on your choice of investments and market performance, you could lose money.
4. Cover Important Home Costs Moving often comes with expenses: furniture, repairs, tools, and upgrades. While these things may not offer a financial return, they can improve the quality of life and even the safety of your home for you and your family.