Mortgage Discount Points Calculator

In most cases, yes. The IRS treats discount points paid on a primary residence purchase as prepaid mortgage interest, which is deductible in the year paid if you itemize and the loan meets the standard requirements: it was used to buy, build or improve your main home, points are an established practice in your area, and you paid them out of pocket rather than financing them. For refinances, points generally have to be deducted over the life of the loan rather than all at once. Confirm your situation with a tax professional, since deduction rules can change from year to year.

The rule of thumb is that 1 discount point (1% of your loan amount) lowers your interest rate by about 0.25%. The actual reduction varies by lender, loan program, credit profile, loan-to-value and market conditions; sometimes it is 0.125% per point and sometimes as much as 0.375%. Lenders publish point pricing on a rate sheet that changes daily. Ask for Loan Estimates showing the rate at zero, one and two points so you can compare real numbers.

Probably not. Points only pay off if you keep the loan past the break-even point, often 4 to 7 years. If you plan to refinance again within 2 or 3 years (because rates may drop, you're consolidating debt, or you want to remove PMI), the upfront cost of points likely won't be recovered before you replace the loan. The same logic applies if you're likely to sell. Use the 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 upfront in exchange for a lower interest rate for the life of the loan. Origination points are a lender fee that covers processing or compensation, and they don't reduce your rate. Both can look similar on a Loan Estimate (each point equals 1% of the loan amount), but only discount points are typically deductible as mortgage interest. When comparing quotes, check whether the points are discount, origination or a mix. A low rate with two origination points can cost more than a slightly higher rate with none.

Yes. Seller-paid discount points are a common seller concession in Texas and a useful negotiating tool, especially in a buyer's market. The seller gives a credit at closing that you apply toward buying down your rate. Concession limits depend on your loan type: conventional allows 3% to 9% (based on down payment), FHA up to 6%, VA up to 4%, and USDA up to 6%. Talk to your STX Lending loan officer about structuring a seller-paid buydown into your offer.