Mortgage Points: What One Point Costs

What is one discount point worth?

The CFPB’s points page, last reviewed October 19, 2023, says one point equals 1 percent of the loan amount. On a $100,000 loan, one point is $1,000. Points do not have to be whole numbers. On that same $100,000 loan, the CFPB’s examples are 1.375 points ($1,375), 0.5 points ($500), and 0.125 points ($125). You pay them at closing, and they are added to closing costs. A loan with one point should have a lower rate than a zero-point loan of the same kind from the same lender, and two points should have a lower rate than one point.

How far the rate moves is not a fixed exchange. The CFPB says the reduction depends on the lender, the kind of loan, and the market. Sometimes one point buys a larger rate cut, and sometimes a smaller one. Some lenders use the word “points” for any upfront fee calculated as a percentage of the loan, even when the rate does not change. The CFPB says the explanation on its page is about points connected to the rate. Ask which kind you are being shown. This page does not tell you to buy points.

Points are also not PMI. PMI is insurance a conventional borrower might have to buy when the down payment, or the equity after a refinance, is under 20 percent. It protects the lender. A discount point is a fee you pay the lender for a lower rate. A Loan Estimate can show both. They answer different questions, and paying one does not cancel the other. Points also do not change the tax and insurance parts of PITI. Those bills can still move the monthly payment after the rate is set.

What does the CFPB’s $180,000 example show?

The same page uses a labeled example, not a rate you can walk in and get. You borrow $180,000 on a 30-year fixed-rate loan at 5.0 percent with zero points. Paying 0.375 points costs more at closing, and the example rate is 4.875 percent. The dollar cost of those points is 0.375 times 1 percent times $180,000, which is $675. The CFPB’s table says that version costs $14 less each month. Taking a lender credit of 0.375 points, which the table shows as negative 0.375, puts $675 toward closing costs and the example rate is 5.125 percent. The table says that version costs $14 more each month. The $14 figures are the CFPB’s rounded description of that table. They are not a quote from a lender today.

Dividing the CFPB’s $675 by its $14 comes to a little over 48 months, because 675 divided by 14 is 48.21. That is only arithmetic on those two table cells. The table does not include taxes, and it does not include what else you could have done with the $675. The CFPB’s own tip is to compare a short timeframe, a long one, and the one you think is likely, because points help only if you keep the loan long enough for the lower payment to matter. The full-payment calculator will recompute principal and interest if you type two different rates. It will not tell you whether paying points is worth it.

Check the $675 another way. One full point on $180,000 would be 1 percent, or $1,800. The example uses less than half of a point: 0.375 is 375 thousandths of one point. Three hundred seventy-five thousandths of $1,800 is the same $675. The rate in the example moves from 5.0 percent to 4.875 percent in exchange for that $675, and to 5.125 percent if you take the $675 as a credit instead. The size of that rate move is the CFPB’s illustration. The CFPB says the move on a real offer depends on the lender, the loan, and the market.

Are mortgage points worth it?

It depends on how long you keep the loan. In the CFPB’s $180,000 illustration, the $675 paid at closing lines up with about $14 less each month, and $675 divided by $14 is a little over 48 months. If you pay the loan off, refinance, or sell before that span, the illustration’s monthly savings have not yet added up to the cash you paid. If you keep the loan longer, the illustration’s monthly savings keep going after the $675 is recovered. That break-even is arithmetic on the CFPB’s table. It ignores taxes and the other uses of the $675, which the table also ignores.

The CFPB says that if you do not know how long you will keep the home or when you will refinance, and you have enough cash for closing and for savings, you might not want to pay points or take a higher rate for a credit. Ask a loan officer for the same loan with points and without them, and look at a short holding period, a long one, and the one you think is likely. A HUD-certified housing counselor can review those two versions with you. The counselor is not a product sold on this site.

A refinance is one reason the holding period can be shorter than you planned. A cash-out refinance replaces the mortgage and can include its own points on the new Loan Estimate. Points you already paid on the old loan are not refunded just because you refinance. The CFPB’s PMI page makes a similar point about an upfront mortgage-insurance premium: if you pay it and then move or refinance, you might not get it back. Points and that premium are different charges. Both can be money you do not recover if the loan ends early.

Where do points show on the Loan Estimate?

The CFPB says points connected to a discounted rate are listed on page 2, Section A, of the Loan Estimate and the Closing Disclosure. By law, points listed there must be connected to a discounted interest rate. Lender credits appear as a negative number on the Lender Credits line on page 2, Section J, and they reduce what you pay at closing. In exchange, the rate is higher than the rate the same lender would have given on the same kind of loan with no credit. The more credit you take, the higher that rate.

Offers from different lenders can be built differently, so one lender’s zero-point rate is not automatically comparable to another lender’s one-point rate. The CFPB says to ask each lender for the same points or the same credit when you compare. That is a way to read two Loan Estimates. It is not a direction to use a particular lender. A recast fee is a different charge, paid later to re-amortize a balance you already have. That math is on the recast calculator. Extra principal after closing is a third choice, described on paying off a mortgage faster.

Nothing in Section A tells you the rate you would have been offered with zero points unless the lender also shows that version. Ask for it. A fee that is a percentage of the loan but does not change the rate may still be called points in a worksheet. The CFPB says points listed in Section A of the Loan Estimate and the Closing Disclosure must be connected to a discounted rate. If a charge is somewhere else, ask what you are buying with it.

What are lender credits, in the other direction?

Lender credits are the mirror of points. You pay less cash at closing and more interest over time. The CFPB says a credit can be described as negative points on a lender’s worksheet. Its example is a $1,000 credit on a $100,000 loan, which is 1 percent, or negative one point. In the $180,000 table, negative 0.375 points is the same $675, this time paid to you as a credit rather than by you as a fee, in exchange for 5.125 percent instead of 5.0 percent. Credits can also exist that are not tied to the rate, such as a temporary offer or a credit for a problem. Ask whether the credit you see changes the rate. If it does not, it is not the tradeoff this page is describing.

The CFPB says that when you compare lenders, ask each one for the same points or the same credit. A lender that looks cheap because of a large credit may be expensive because of the rate, and a lender that looks expensive because of points may be cheaper over a long holding period. Neither pattern is true of every offer. The only comparison that holds is the pair of Loan Estimates in front of you, read over more than one timeframe.

Nothing here is a recommendation to pay points or to take a credit. The numbers that control are the ones on your Loan Estimate, not the $180,000 illustration above. The illustration uses a 30-year term and three rates that sit 0.125 percentage points apart. A loan you are offered can use a different term, a different gap, and a different point cost. Recompute the break-even from the two payments and the dollar points on your own disclosure. Do not reuse $14 or $675 unless those are the figures on that disclosure.

A point is also not a recast and not an extra principal payment. Paying points at closing changes the rate on a new loan. A recast, later, changes the payment on a balance you have already reduced, usually at the same rate. Sending extra principal shortens the balance without buying a lower rate. The CFPB’s points page is about the rate tradeoff on the Loan Estimate. Use it for that question only. If the holding period in the $180,000 illustration is the part you care about, write down the cash due at closing on each version you were offered and the principal-and-interest payment on each, and divide the difference in cash by the difference in the monthly payment. That quotient is a count of months for those two offers. It is not a reason to choose a lender this site has not seen.

Sources checked October 20, 2026

• CFPB: How should I use lender credits and points (also called discount points)?, last reviewed October 19, 2023