Are Mortgage Points Worth It? A California Break-Even Guide (2026)

Short answer: mortgage points are worth it only if you keep the loan long enough to pass the break-even point. One discount point costs 1% of your loan amount up front and lowers your rate by about 0.25%. To decide, divide the cost of the points by your monthly savings — that's how many months it takes to break even. Stay in the loan longer than that and you come out ahead; sell or refinance sooner and you've lost money. With 2026 rates in the mid-6s, buydowns are popular, but the math has to work for your specific timeline.

How points actually work

Points (also called discount points or a rate buydown) are prepaid interest. You pay a fee at closing in exchange for a permanently lower rate for the life of the loan. On a $500,000 California loan, one point costs $5,000 and might drop your rate from 6.5% to roughly 6.25%. See today's rates for the current cost-to-savings ratio, which changes daily.

The break-even formula

The only number that matters is your break-even point: cost of points ÷ monthly savings = months to break even. If one point costs $5,000 and saves you $80/month, you break even in about 63 months — a little over five years. Plan to keep that loan more than five years and the points pay off; plan to sell or refinance sooner and they don't. Run your exact numbers in the mortgage calculator.

When buying points makes sense

Points work best when you're confident you'll hold the loan long-term, you have cash beyond your down payment and reserves, and rates are unlikely to fall enough to make you refinance soon. They're most valuable on a long-term primary residence. If there's a good chance you'll refinance when rates drop — see our rate forecast for the rest of 2026 — paying for a permanent buydown is usually the wrong move.

When to skip points (and what to do instead)

If your timeline is short or your cash is tight, skip points and keep that money for reserves, a larger down payment (which can also remove PMI), or closing costs. Another option in a high-rate market is a temporary buydown (like a 2-1 buydown), where a seller or builder credit lowers your rate for the first year or two — useful when you expect to refinance. And remember our price guarantee: we'll make sure the buydown cost is competitive before you commit.

The Save Financial rebate angle

If you're also buying through our sister brokerage, the buyer rebate can effectively fund part of a buydown — turning commission savings into a lower rate. Ask your loan officer to compare using cash toward points versus toward your down payment, since the better move depends entirely on your hold period and goals.

About this guide: Save Financial is a California-licensed mortgage lender (NMLS #377740, DRE #01875766) serving all 58 counties. For a real, personalized quote, apply online or call 888-703-1840.