Are mortgage points tax deductible?

Points paid on a home purchase are generally fully deductible in the year paid. Points on a refinance must be deducted over the life of the loan. Consult a tax advisor since rules depend on your specific situation.

What is a 2-1 buydown?

A temporary rate buydown often offered by home builders. Year 1: rate is 2% below the note rate. Year 2: 1% below. Year 3+: at the full note rate. The seller/builder funds the difference in a buydown account. It's a selling incentive, not a permanent rate reduction.

Should I buy points or make a larger down payment?

If you're close to an LTV threshold (e.g., 80% to avoid PMI), a larger down payment can save more. If already at 80% LTV, compare the monthly savings from points vs. the income the down payment money could generate if invested. The break-even analysis is key.

What are negative points (lender credits)?

The reverse of buying points: the lender pays your closing costs in exchange for a higher interest rate. Useful if you're short on cash or plan to sell/refinance soon. Break-even analysis applies in reverse — how long until the higher rate costs you more than the credit saved?

Points vs Rate Calculator — Mortgage Points Break-Even | KalkWise

By the KalkWise Editorial Team Reviewed for accuracy Updated June 2026

What is the points vs rate calculator — mortgage points break-even?

In short

Buying one mortgage point (1% of loan) typically reduces the interest rate by 0.25%. On a $400,000 loan, 1 point costs $4,000 and saves about $55/month. The break-even is ~73 months (6 years). If you sell or refinance before then, buying points costs more than it saves.

Calculates the dollar cost of buying mortgage discount points, monthly payment savings, and the break-even month when points pay off.

How to use this calculator

1Enter your loan amount.
2Enter the base interest rate (without buying points).
3Enter the lower rate you'd get by buying points.
4Enter the cost of the buy-down in points (1 point = 1% of loan).
5Enter loan term in years.

The formula

points cost=loan×points %

break-even=points costmonthly savings

Points Cost = L × P%; Monthly Savings = PMT₁ − PMT₂; Break-Even = Points Cost ÷ Monthly Savings

L: — Loan amount
P: — Points cost (% of loan)
PMT₁: — Base rate monthly payment
PMT₂: — Buy-down rate monthly payment

Worked example

The scenario

$400,000 loan, 7.25% base rate vs 7.00% with 1 point, 30-year term.

gives

The result

Points cost = $4,000. Monthly savings = $66. Break-even = 61 months (5.1 years).

Common use cases

Decide whether to pay points to lower your mortgage rate.
Compare lender offers with different rate/point combinations.
Evaluate a 2-1 buydown offer from a home builder.
Plan how long you need to stay in the home for points to be worthwhile.

Limitations & assumptions

Break-even assumes no refinancing before that point.
Does not account for the opportunity cost of the upfront points payment.
Tax deductibility of points varies by whether it's a purchase or refinance.
ARM borrowers should be especially cautious since rates change regardless of points paid.

Frequently asked questions

Typically 0.20–0.25% per point, but this varies by lender, loan type, and market conditions. Some lenders quote 0.125% reduction per point on certain products. Always ask the lender for their specific rate/point schedule.

Disclaimer: KalkWise calculators are provided for general informational and educational purposes only and do not constitute financial, investment, tax, or legal advice. Results are estimates based on the figures you enter and the assumptions described above. Actual outcomes will vary. Consult a qualified professional before making financial decisions.

Mortgage Points Details