Mortgage Points Calculator

In most cases, yes. The IRS treats discount points paid on a primary residence purchase as prepaid mortgage interest, which is fully deductible in the year paid if you itemize and the loan meets standard requirements (used to buy/build/improve your main home, points are an established practice in your area, and you paid them out of pocket — not financed). For refinances, points must generally be deducted ratably over the life of the loan rather than all at once. Always confirm your specific situation with a tax professional, since rules around deductions can shift year to year.

The industry rule of thumb is that 1 discount point (1% of your loan amount) drops your interest rate by about 0.25%. In reality, the exact reduction varies by lender, loan program, credit profile, loan-to-value, and current market conditions — sometimes you'll see 0.125% or as much as 0.375% per point. Lenders publish their actual point pricing in a 'rate sheet' that updates daily. Always ask for a side-by-side Loan Estimate showing the rate at zero points, one point, and two points so you can compare real numbers, not estimates.

Probably not. Points only pay off if you keep the loan past the break-even point — typically 4 to 7 years. If you plan to refinance again within 2-3 years (because rates may drop further, you're consolidating debt, or removing PMI), the up-front cost of points likely won't be recovered through monthly savings before you replace the loan. The same logic applies if you're likely to sell. Use this calculator's 'Plan to keep loan' input to model your real horizon — if break-even lands beyond your stay, skip the points and put the cash toward principal or reserves instead.

Discount points are optional — you choose to pay them up-front in exchange for a permanently lower interest rate. Origination points are a lender fee charged to compensate the loan officer or cover processing costs, and they don't reduce your rate. Both look similar on a Loan Estimate (each equals 1% of the loan amount), but only discount points are typically tax-deductible as mortgage interest. When comparing lender quotes, always check whether quoted points are discount, origination, or a mix — a low rate with two origination points can easily cost more than a slightly higher rate with none.

Yes — seller-paid discount points are a common form of seller concession in Texas and a powerful negotiating tool, especially in a buyer's market. The seller writes a credit at closing that you apply toward buying down your rate, sometimes called a 'rate buydown.' Concession limits depend on your loan type: Conventional allows 3-9% (based on down payment), FHA allows up to 6%, VA up to 4%, and USDA up to 6%. The credit can also be tax-deductible to you as the buyer. Talk to your STX Lending loan officer about structuring a seller-paid buydown into your offer.