Rates & Loans
What are mortgage discount points and are they worth it?
Updated Jul 1, 2026
The short answer
Discount points are an optional up-front fee you pay to lower your interest rate — one point costs 1% of the loan amount and typically buys a modest rate reduction. They pay off only if you keep the loan long enough for the monthly savings to exceed the up-front cost, known as the break-even point. Lender credits work in reverse: the lender covers some closing costs in exchange for a higher rate.
Key points
- One point = 1% of the loan amount, paid up front.
- Points lower your rate; lender credits raise it to cut up-front costs.
- Worth it only if you stay past the break-even point.
Finding your break-even
Divide the cost of the points by the monthly payment savings to get the number of months to break even. If you expect to sell or refinance before then, points usually are not worth it.
Put this to work
Sources
Every claim above traces to a public government source.
- ViewT1What are (discount) points and lender credits?
Consumer Financial Protection Bureau · Government / primary · 2024