Mortgage Points: How to Save Thousands on Your Home Loan
January 30, 2026
3 minutes
Imagine you’re taking out a $300,000 mortgage. If your interest rate is 6.5%, your monthly payment (excluding taxes and insurance) would be about $1,896.
But if you buy one mortgage point for $3,000 (1% of the loan), your interest rate might drop to 6.25%. That small change could save you roughly $50 a month. Over 30 years, that’s $18,000 in total savings.
Sounds good, right? Let’s break down mortgage points so you can decide if they’re worth it.
What Are Mortgage Points?
Mortgage points (also called discount points) let you pay extra upfront to lower your interest rate. Each point usually costs 1% of your loan amount and reduces the interest rate by about 0.25%.
For example, if your loan is $400,000, one mortgage point costs $4,000 and could lower your rate from 7% to 6.75%. This can reduce your total interest payments over the life of the loan.
Understanding mortgage points also means knowing how they impact your overall borrowing cost. Explore the difference between APR and interest rate.
How Do Mortgage Points Work?
- You pay upfront – When you close on your mortgage, you pay for points along with other closing costs.
- Lower rate, lower payments – Buying points reduces your interest rate, which means lower monthly mortgage payments.
- Break-even point matters – You need to stay in the home long enough to make back what you spent on points through monthly savings.
Another strategy to reduce your monthly mortgage payment is through mortgage recasting, an alternative worth exploring.
What You Must Know About Mortgage Points?
| Factor | What It Means | Why It Matters | How It Works |
|---|---|---|---|
| Lower Interest Rate | Reduces your loan’s interest rate | Saves money on interest over time | Buying 1 point typically cuts the rate by 0.25% |
| Lower Monthly Payments | Makes your mortgage more affordable | Easier to manage finances | A lower rate means you pay less every month |
| Higher Upfront Costs | You need cash at closing to buy points | Might strain your budget if funds are tight | If you don’t have savings, points may not be a good idea |
| Break-even Period | The time it takes to recover the cost of points | Staying longer makes points more worthwhile | If you sell or refinance too soon, you might lose money |
| Not Always Necessary | Some buyers might not benefit from points | If you plan to move soon, they may not be worth it | The longer you stay, the better the savings |
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Why Loan Term Matters: 15-Year vs. 30-Year Mortgages
Mortgage points have a bigger impact on longer loans. Here’s why:
| Loan Term | Monthly Payment (with points) | Total Interest Saved |
|---|---|---|
| 30-Year Loan | Lower monthly payments, but more interest over time | Saves more in total interest |
| 15-Year Loan | Higher payments, but you pay off the loan faster | Less time for points to make a difference |
If you’re taking a 30-year mortgage, buying points makes more sense because you’ll be paying interest for a long time. With a 15-year loan, you’re already saving on interest, so points may not have as big of an impact.
To dive deeper into which loan term suits you best, read our comparison on 15-year vs. 30-year mortgages.
Should You Buy Mortgage Points?
Ask yourself these questions:
- How long do I plan to stay in the home?
- Do I have enough savings to cover both closing costs and mortgage points?
- How much will points reduce my interest rate?
- Will I reach my break-even point before I sell or refinance?
If you’re staying in the home for a long time and have the extra cash, buying points can be a smart move. If you’re planning to move or refinance soon, it may not be worth it.
A qualified mortgage loan originator can provide personalized advice to help you evaluate the worth of buying points.
Final Thoughts
Mortgage points can save you a lot of money over time, but they require an upfront investment. The key is to calculate your break-even point and make sure you’ll benefit in the long run. However, saving money on your home purchase isn’t just about mortgage points reducing upfront costs can also help.
Ready to Maximize Your Mortgage Savings? Combine reAlpha’s commission-free buying with strategic mortgage points to slash thousands off your homeownership costs. Save up to 3% instantly - no hidden fees, just pure savings.
Before deciding on mortgage points, it's essential to secure mortgage pre-approval to ensure you're shopping within your budget.
FAQs
When should I consider mortgage points?
- If you plan to stay in the home long enough to recover the cost.
- If you want to lower your interest rate and monthly payments.
- If you have extra cash at closing.
When should I avoid mortgage points?
- If you don’t have enough savings to cover upfront costs.
- If you plan to sell or refinance soon.
- If you prefer to keep more cash for other expenses.
How many points should I buy?
It depends on your loan amount, lender policies, and how long you plan to keep the mortgage. Talk to a lender to determine the best option for you.
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Article by
Rocky Billore is a mortgage industry leader and Chief Sales Officer with over two decades of experience across residential and commercial lending. Since entering the industry in 2004, he has been directly involved in funding more than $1.4 billion in loans. A recognized expert in VA and government lending, Rocky combines deep program knowledge with a data driven, relationship-first leadership style. His work focuses on building scalable sales organizations, developing high performing teams, and aligning technology with real world lending outcomes to improve the homeownership experience.