--- title: "Discount Points: Breakeven Without a Sales Pitch | Ondo Real Estate | Ondo RE" canonical: https://www.ondorealestate.com/blog/discount-points-breakeven-without-sales-pitch/ --- # Discount Points: Breakeven Without a Sales Pitch Points are prepaid interest. They are not a coupon for approval. [Home](/)[Learn](/learn/)MortgagesMortgages Educational [← Mortgage learning hub](/learn/) Discount points are optional prepaid interest: typically 1% of the loan amount per point, paid at closing to lower the note rate for the life of that loan. Whether that purchase pays off is a calendar question — months until the extra cash at closing is earned back in principal-and-interest savings — not a sales pitch about a headline rate. Snapshot as of 2026-08. Buying points is not how you get “the best rate.” Pricing is file-specific. Compare two Loan Estimates with the same lock period, not a blog’s favorite point strategy. Discount points change the note rate for the whole term. A temporary buydown (2-1 / 3-2-1) only subsidizes the payment for the first years; the note rate is still the note rate. Those are different products. ## A worked break-even (illustration only) Dollar figures on education pages are worked examples for illustration. They are not your payment, cash to close, or an offer of credit. On an 80% loan of $360,000 against a $450,000 illustration price, one point costs $3,600. If monthly principal and interest were $28 lower than the same loan with zero points (a typed illustration, not a quote), break-even is about 129 months. If you sell or refinance in year two, the points can lose. If you keep the loan twelve years, they can look cheap. The Loan Estimate has to show both files with the same lock period. Break-even months ≈ point cost ÷ the monthly principal-and-interest savings versus the same loan with fewer or no points. If you sell, refinance, or recast before that month, the points can lose. Origination and lender credits are a different LE line — do not mix them into “points” casually. Put points in the cost box of the [refinance calculator](/calculators/refinance/) the same way — a lower note still loses after costs. Purchase pricing lives on [why your quote is not the 30-year average](/buy/rates/). Points vs a temporary buydown as of 2026-08. Not a recommendation to buy either.Question[Discount points](/buy/rates/)[Temporary buydown](/blog/temporary-buydown-who-pays-year-three/) What it changesOne discount point is typically 1% of the loan amount paid at closing to lower the note rate for the life of that loan (or until you refinance or sell). It is prepaid interest, not a fee that “gets you approved.”A subsidy of the monthly payment for a stated period. The note rate is still the note rate. When the benefit endsWhen you refinance, sell, or the loan is paid off. Not on a calendar year-3 cliff.When the subsidy period ends (year 3 on a 2-1; year 4 on a 3-2-1). Then you pay the full note payment. How to compareBreak-even months ≈ point cost ÷ the monthly principal-and-interest savings versus the same loan with fewer or no points. If you sell, refinance, or recast before that month, the points can lose. Origination and lender credits are a different LE line — do not mix them into “points” casually.Cost of the subsidy vs years of lower payment. Model it; do not assume it is “free from the builder.” Lender credits that raise the rate are the opposite trade of buying points. Compare cash to close and APR on the same LE. ## What happens next - Ask for two Loan Estimates: zero points vs the point structure they are selling, same lock window. - Divide point cost by monthly P&I savings. If your expected hold period is shorter, skip the points or take a credit instead. - If a builder is offering a 2-1 instead, that is [temporary buydown: who pays, year 3](/blog/temporary-buydown-who-pays-year-three/) — model it on the [buydown calculator](/calculators/temporary-buydown/). ## Common questions ### What is a discount point? ### How do I know if buying points is worth it? ## Keep going [Why your quote is not the 30-year average Why a news 30-year average is not your Loan Estimate. Locks, APR, and points. Not a live rate table.](/buy/rates/)[APR vs Rate on a Loan Estimate The note rate prices principal and interest. APR folds in most lender prepaid finance charges. Compare Loan Estimates — this is not a live-rate table.](/blog/apr-vs-rate-on-a-loan-estimate/)[Temporary Buydown: Who Pays, What Happens in Year 3 2-1 and 3-2-1 buydowns subsidize the payment for a few years. The note rate is still the note rate. Distinct from buying discount points.](/blog/temporary-buydown-who-pays-year-three/)[When a Lower Rate Still Loses After Costs Break-even months include points and origination, not just the appraisal. A lower note rate can still lose if you move or refinance again first.](/blog/refinance-break-even-when-lower-rate-loses/)[Refinance savings calculator Payment change and break-even timing. Closing costs matter.](/calculators/refinance/)[Start a mortgage conversation What you will be asked, and what a conversation will not promise. This is not an instant approval, a lock, or a commitment to lend.](/qualify/) ## What to do next Education first. A conversation with a loan officer is how you find out what may actually fit your file. [Why a quote is not the news average](/buy/rates/)[Refinance savings calculator](/calculators/refinance/)[Start a mortgage conversation](/qualify/) Loan information is provided by Ondo Real Estate (NMLS ID on file). This is not a commitment to lend, a loan approval, or an offer of credit. Rates, terms, and payments shown are estimates for illustration only, are not a quote, and are subject to credit approval, underwriting, and market conditions. You are not required to use Ondo for financing to buy or sell with Ondo. Equal Housing Lender. Program rules, fees, and county loan limits change. Confirm the current published schedule and lender overlays. Nothing here is a quote, a lock, or a credit decision. [Licensing and disclosures](/licensing/)