Mortgage Discount Points Explained: Should You Buy Down Your Rate in 2026?

When you receive a mortgage quote, you will often see a line for "discount points." It is one of the most misunderstood numbers in the entire process — and getting it right or wrong can cost or save you thousands of dollars.

Here is exactly what points are, how to do the math, and when buying down your rate makes sense in 2026.

What a Discount Point Actually Is

A discount point is prepaid interest. You pay the lender cash at closing, and in exchange they lower your interest rate for the life of the loan.

• One point costs 1% of your loan amount — on a $300,000 loan, that is $3,000
• One point typically lowers your rate by roughly 0.25%, though this varies
• You can buy fractions of a point, or sometimes more than one

The opposite also exists: a lender credit is a "negative point" — the lender gives you money toward closing costs in exchange for a slightly higher rate.

The Break-Even Calculation

The entire decision comes down to one question: how long until the monthly savings repay the upfront cost?

When Buying Points Makes Sense

• You plan to stay in the home well beyond the break-even point — ideally 7+ years
• You have enough cash for the down payment, closing costs, reserves, and points — points should never come out of your reserves
• Rates are elevated and you do not expect to refinance soon

When to Skip Points

• You may move or refinance within a few years — you would never reach break-even
• Cash is tight — that money does more good as reserves or a larger down payment
• Rates are expected to fall and you would likely refinance — paying to lower a rate you will soon replace is wasted money

The 2026 Context

With 30-year rates in the mid-6% range in 2026, many buyers expect to refinance if rates ease. That expectation is exactly why points deserve caution this year — paying thousands to shave a rate you might replace in 18 months rarely pays off. Often the smarter move is a lender credit to reduce closing costs now, keeping cash available.

Run It Before You Commit

Points are not good or bad in the abstract — they are good or bad for your timeline. Before you accept a quote with points baked in, the break-even math should be done with your real numbers and your real plans.