Discount Points (Mortgage Buy-Down)
mortgageAlso known as: discount points, mortgage points, rate buy-down, origination points
Updated · Written and reviewed by Konstantin Iakovlev
Detailed explanation
Permanent buy-down: pay points → lower rate for the life of the loan. Temporary buy-down (2-1, 3-2-1): seller-funded subsidy reduces rate for first 1-3 years, then resets to note rate (popular in 2023-2024 high-rate environment). Calculate break-even: (cost of points) ÷ (monthly payment savings). Worth it if you'll hold the loan past break-even. Discount points are deductible as mortgage interest IF the loan is on your principal residence — fully deductible in year 1 for purchase, amortized over loan life for refinance. Note: "origination points" are different — they pay the lender for processing and do NOT reduce your rate.
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