How Many Mortgage Points Can I Buy? Understanding the Cost, Limits, and Benefits

When shopping for a mortgage, you’ll likely hear the term “mortgage points” o “discount points.” These points are one of the most effective tools homebuyers can use to lower their interest rate and long-term mortgage costs. But how many can you actually buy—and should you buy them?

In this article, we’ll break down how mortgage points work, how many you can buy, and whether they’re worth it based on your financial goals.

What Are Mortgage Points?

Mortgage points are upfront fees you pay to your lender at closing in exchange for a lower interest rate on your mortgage. This is commonly referred to as “buying down your rate.”

• 1 mortgage point = 1% of your loan amount.
• In most cases, 1 point lowers your interest rate by 0.25%, though this varies by lender and market conditions.

For example, on a $300,000 loan, one point would cost $3,000 and could reduce your rate from 7.00% to 6.75%.

How Many Can You Buy?

There’s no universal cap, but most lenders allow you to buy between 1 and 4 points. The exact number depends on:

• Loan type (conventional, FHA, VA, jumbo)
• Lender policy
• Market conditions
• State and federal regulations

Some loan programs may cap the amount you can pay in points and fees—especially if you’re pursuing a Qualified Mortgage (QM), which is designed to protect borrowers from risky features.

Typical Limits

Keep in mind, points are optional, and you don’t need to buy them to get a mortgage.

Benefits of Buying Mortgage Points

Buying mortgage points can be a smart move if you:

• Plan to stay in your home long term
• Want to lower your monthly payment
• Expect interest rates to rise
• Have extra cash on hand at closing

Here’s how the benefits break down:

1. Lower Monthly Payments

By reducing your interest rate, you’ll lower your monthly mortgage payment, which frees up cash each month for other expenses or savings.

2. Long-Term Savings

If you stay in your home for several years, the amount you save in interest can outweigh the upfront cost of the points.

3. Tax Deductions

In many cases, mortgage points may be tax-deductible, especially on a primary residence. Always consult a tax advisor to confirm your eligibility.

When Are Mortgage Points Worth It?

To determine if buying points is right for you, calculate your break-even point—the time it takes for your monthly savings to equal the upfront cost of the points.

Example:

• You pay $3,000 for 1 point
• You save $50/month on your mortgage
• $3,000 ÷ $50 = 60 months (or 5 years)

In this case, if you plan to stay in the home longer than 5 years, buying the point makes financial sense.

Can You Finance Mortgage Points?

Yes, you can sometimes roll points into your loan, but doing so increases your loan amount and could reduce your overall savings. It’s best to pay for points out-of-pocket if possible.

Final Thoughts: Should You Buy Them?

They can be a valuable tool to lower your interest rate and long-term costs—but they’re not for everyone. Whether or not you should buy them depends on your:

• Loan type
• Budget at closing
• How long you plan to own the home

Want to know if buying points makes sense for your situation? Connect with a local ALCOVA Mortgage expert today →

FAQs

Are mortgage points tax-deductible?

Yes, in most cases, especially for primary residences. Check with a tax professional.

Can you negotiate?

Lenders may offer flexibility, especially if you’re a strong borrower. It’s worth asking.

Are mortgage points the same as origination points?

No. Origination points are fees lenders charge to process your loan. Discount points are specifically for buying down your interest rate.

Need help navigating your mortgage options?
Contact ALCOVA Mortgage to speak with a loan officer and learn what’s right for you.