The relevance of buying mortgage points (or “discount points”) in 2026 depends primarily on how long you plan to keep your mortgage before selling or refinancing.
Guidelines for deciding
Do you plan to stay longer than 5 years? If so, buying points is often worthwhile. On average, it takes about 60 to 65 months (5 to 5.5 years) to reach the break-even point, where the monthly interest savings offset the initial cost.
Do you have the necessary funds? One point typically costs 1% of the total loan amount and reduces your interest rate by about 0.25%. Make sure this purchase doesn’t reduce your down payment below 20%, which could trigger expensive mortgage loan insurance (MLI).
Are you planning to refinance? If market rates (currently around 6% at the beginning of 2026) fall soon, paying to lower your current rate could be a waste of money if you refinance before recouping your initial investment.
Break-Even Analysis
To determine if points are worthwhile, use this simple formula:
Total Cost of Points:
Multiply your loan amount by the percentage of points (e.g., 1% for 1 point).
Monthly Savings:
Subtract your monthly payment with points from your monthly payment without points.
Payback Period:
Divide the total cost by the monthly savings to determine the number of months it will take to recoup your investment. Concrete example (Loan of $300,000 in 2026): Cost of 1 point (1%): $3,000. Estimated monthly savings: $50. Break-even point: 3,000 / (50) = 60 months (5 years).
Advantages and Disadvantages
Advantages:
Reduced total cost of credit over 30 years and potential tax deductibility of points as prepaid interest (if you itemize your deductions).
Disadvantages:
Significant initial investment that reduces your cash flow for renovations or emergencies.