Mortgage Points vs Rate Comparison Guide for Cost Optimization (2026)
Compare mortgage points vs lower rate: break-even calculation, tax deductibility, cash flow impact, and timing considerations for optimal mortgage cost.
Summary
Mortgage points reduce rate but cost upfront. This guide explains break-even analysis, tax treatment, and decision criteria for points vs rate selection.
Key Steps
- 1Calculate point cost: 1 point = 1% of loan amount ($4,000 per point on $400K).
- 2Determine rate reduction: typically 0.25% rate reduction per point.
- 3Calculate break-even: point cost divided by monthly savings = months to recoup.
- 4Check tax deductibility: points deductible if primary residence, paid at closing.
- 5Consider time horizon: pay points only if break-even before expected sale/refinance.