Is Paying Mortgage Points Ever a Good Idea?

If you’re shopping for a home mortgage, you’ve probably seen the term “mortgage points.” Before you take the next step to sign a mortgage preapproval or other borrowing commitment.

Taking out a mortgage is a big financial decision, so don’t miss the opportunity to take advantage of mortgage points when it’s wise for your situation.

Medium Brush Stroke

Paying points can help you get the best deal possible on your next new home.

1. Why Mortgage Points Can Help Home Buyers

Mortgage points, also known as discount points, reduce the interest rate you pay on a home loan. While you must pay them upfront, they typically save money over time.

2. How Much Home Buyers Pay for Mortgage Points

One mortgage point typically costs 1% of your home loan amount. So, if you want to borrow $300,000 to buy a property, one mortgage point would cost $3,000.

Most homebuyers who opt for points buy between one and three and have the option to purchase fractions of points. However, the challenge for buyers is that lenders typically require you to pay points up front.

3. The Pros of Paying Mortgage Points

As I mentioned, paying a few thousand dollars upfront can save tens of thousands of dollars in the long run.

When you get an APR discount that allows you to break even, paying points is worth it. More about breaking even in a moment.


Finding a financial advisor doesn’t have to be hard. SmartAsset’s free quiz matches you with fiduciary financial advisors in your area or who serve your area. If you are ready to be matched with financial advisors that can help you achieve your financial goals, take the quiz now.