Are Mortgage Points Worth It in Maryland in 2026? The Math, the Break-Even, and When to Say No

Every Maryland buyer I work with eventually gets the conversation with their lender about discount points. The pitch is usually: "We can buy down your rate from 6.75% to 6.25% for $X at closing." The buyer looks at me. I usually say "it depends." Here's why, and how to figure out whether points are actually worth it for your deal in 2026.

What is a mortgage point?

A discount point (often just called a "point") is 1% of your loan amount, paid at closing, in exchange for a lower interest rate for the life of the loan.

On a $600,000 loan, 1 point = $6,000 paid at closing.

The rate reduction varies by lender and market conditions, but typically:

• 1 point buys down the rate by 0.25% (sometimes 0.125–0.375%)
• 2 points buys down by ~0.50%
• 0.5 point buys down by ~0.125%

The math isn't always linear — diminishing returns kick in after the first point. Always ask your lender for the exact rate at each point level.

Important distinction: "Discount points" (which buy down your rate) are different from "origination points" (which are lender fees and don't buy you a lower rate). Make sure you're talking about discount points on your Loan Estimate.

How do mortgage points work in Maryland in 2026?

Here's a real example from a deal I closed last quarter — Maryland buyer, $620,000 conventional loan, 20% down, 30-year fixed.

The lender offered:

• No points: 6.875% rate, $4,070/month P&I
• 1 point ($6,200): 6.625% rate, $3,968/month P&I → saves $102/month
• 2 points ($12,400): 6.375% rate, $3,866/month P&I → saves $204/month

Break-even math:

• 1 point: $6,200 ÷ $102/month = 61 months (5.1 years) to break even
• 2 points: $12,400 ÷ $204/month = 61 months (5.1 years) to break even

If the buyer kept the loan longer than 5 years, points were a good deal. Shorter, not worth it.

When are mortgage points worth it in Maryland?

The simple decision rule: points are worth it if you'll keep the loan longer than the break-even period.

The break-even is usually somewhere between 48 and 72 months (4–6 years) in 2026. It varies by:

• The point cost (depends on the rate buydown ratio)
• The interest rate environment (higher rate = more room to buy down)
• The loan amount (bigger loans → bigger monthly savings → faster break-even)
• The mortgage term

Points are usually worth it if:

• You plan to stay in the home for 7+ years
• You're confident you won't refinance before then (locked in a low rate, or trapped by a higher market)
• You have the cash to pay upfront without depleting reserves
• Your loan is large (jumbo loans benefit more from rate reductions)

Points are usually NOT worth it if:

• You might sell within 3–5 years
• Rates might drop and you'd refinance (in 2026, with rates in the mid-6s, this is a real possibility)
• You're stretched on closing cash and need it for inspection/reserves/escrow
• The break-even is close to your expected hold period

The honest answer for most MoCo buyers in 2026: the math is borderline, and I see roughly 30–40% of buyers opt to pay at least 0.5 to 1 point.

How do I calculate the break-even on mortgage points?

Three-step math:

Step 1: Get the cost. Loan amount × point % = cost of points. Example: $600,000 loan × 1.5 points = $9,000.

Step 2: Get the monthly savings. Calculate monthly P&I at both rates. Subtract. Example: $3,793/month at 6.875% vs $3,690/month at 6.625% = $103/month savings.

Step 3: Divide cost by monthly savings. $9,000 ÷ $103 = 87 months break-even (7.25 years).

If you'll keep the loan more than 7.25 years, points are profitable. Less, you're losing money.

Rule of thumb shortcut: if the break-even is under 5 years, points are usually worth it. Over 7 years, usually not. 5–7 years is the gray zone.

Are mortgage points tax-deductible in Maryland?

Yes — with conditions.

Discount points on a primary residence are deductible as mortgage interest in the year you pay them, if:

• You used the loan to buy the home (not refinance)
• The points were paid for a lower interest rate (not origination fees)
• You itemize deductions on your federal return
• The points are reasonable compared to market norms

For a refinance, points are typically deducted over the life of the loan, not in year one.

Maryland-specific: Maryland conforms to federal mortgage interest deductibility, so deducted points reduce both federal and Maryland taxable income.

Practical reality: the 2017 TCJA raised the standard deduction to $29,200 (married filing jointly, 2026 estimated). Many MoCo households don't itemize anymore unless their state and local taxes (SALT) + mortgage interest + property tax + charitable contributions exceed the standard deduction. Confirm with your CPA before assuming points will be deductible. See capital gains tax when selling your home in Maryland for related Maryland real estate tax discussion.

Should I buy mortgage points if I think rates will drop?

Probably not.

In 2026, mortgage rates are sitting in the mid-6s on 30-year fixed. There's a meaningful possibility rates drop to the high-5s in 2027 or 2028. If that happens, anyone who paid points to buy down a 6.75% rate today will refinance into a 5.75% rate later, and the points become wasted money.

The smart play in a high-rate / potentially-falling rate environment:

• Skip points
• Take the standard rate
• Plan to refinance if rates drop more than 0.75% (rule of thumb)
• Use the cash you would have spent on points for reserves, repairs, or principal paydown

The exception: if rates are expected to rise (e.g., during a 2022-style cycle), buying points locks in the lower rate forever — and that's a strong move. In 2026, we're in the opposite situation.

For the current rate environment, see mortgage rates at 3-year low for DC metro buyers 2026 and is now a good time to buy a home in Montgomery County.

What's the difference between discount points and origination points?

This trips up a lot of first-time buyers. Both are 1% of the loan amount. Both appear on your Loan Estimate. They are completely different.

| | Discount points | Origination points | |--|---|---| | Purpose | Buy down your interest rate | Lender's fee for processing the loan | | Cost | 1% of loan per point | 1% of loan per point | | Benefit | Lower rate for life of loan | None to you — pure fee | | Negotiable | Yes — at any level you want | Yes — shop multiple lenders | | Tax deductible | Yes (with conditions) | No |

Action: when reviewing your Loan Estimate, scrutinize Section A ("Origination Charges"). It should be clear which are origination fees and which are discount points. If unclear, ask your lender to clarify in writing. Origination points should be zero or as low as possible — they're pure lender margin. Discount points are your choice based on the math above.

Can I negotiate mortgage points with my lender?

Yes. Mortgage points are one of the most negotiable items in your loan.

Where you have leverage:

• Origination fees — these are often padded. Ask for "lender credits" or lower origination on your Loan Estimate.
• Number of discount points — you choose how many (0 to 3 typically). Some lenders push 1–2 points; you can decline.
• Lender credits in exchange for higher rate — the inverse of discount points. The lender pays some of your closing costs in exchange for you accepting a slightly higher rate. Useful for cash-tight buyers.

The best leverage: shop multiple Maryland lenders. Get 2–3 Loan Estimates. Compare the rate at zero points across all of them. The lender with the lowest "par rate" (the rate at zero points and zero credits) is the best baseline, regardless of point pitches.

What's a "lender credit" and how does it relate to points?

A lender credit is the opposite of a discount point. Instead of paying cash for a lower rate, you accept a higher rate and the lender pays some of your closing costs.

Example:

• Standard rate: 6.75%, no credit
• Lender credit option: 7.00% rate, $3,000 lender credit toward closing costs

This is essentially a financed closing cost. The lender recovers the credit through higher interest payments over the life of the loan. Same break-even math applies — just in reverse:

• If you'll keep the loan less than the break-even period → lender credit saves you money
• If you'll keep it longer → lender credit costs you money

Lender credits make sense for:

• Buyers who are cash-tight at closing
• Buyers planning to refinance or sell within 3–5 years
• Buyers using FHA or VA loans where closing costs are larger

For more on the buyer cash side, see the real cost of buying a home in Maryland and how much home can you afford in Montgomery County.

How many points should I buy?

The honest answer: most Maryland buyers in 2026 should buy zero points, or at most 0.5 point.

The reasoning:

• Rates are likely to drop somewhat in the next 1–3 years
• Refinancing wipes out point investment
• Average Maryland homeowner sells within 7–9 years
• The break-even is uncomfortably close to the average hold period

The exceptions where I'd actually recommend points:

• You're certain you're in the home for 10+ years (long career stability, school district lock-in, multi-generational)
• The loan is jumbo size (Bethesda/Potomac), where the dollar savings compound
• You have cash reserves well above closing costs + 6 months expenses — i.e., the points won't strain you
• You believe rates won't drop materially (uncommon view in 2026, but possible)

The pitch from lenders to buy 1–2 points is real, and they're not wrong about the long-term savings if you keep the loan. The piece they often gloss over is the refinance risk.

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The bottom line

Mortgage points let you pay cash at closing to lock in a lower interest rate. The math:

• 1 point = 1% of the loan amount paid up front
• Typical rate reduction: 0.125–0.25% per point
• Break-even period: usually 4–7 years in the 2026 rate environment
• Worth it if you'll keep the loan longer than break-even AND won't refinance
• Skip them if you might sell or refinance within 5 years

For most MoCo buyers in 2026 sitting at a 6.5–7% rate environment with potential for rates to drop, the cautious play is no points — keep the cash, take the slightly higher payment, and refinance later if rates fall.

For the full picture of mortgage strategy when buying in Maryland, see pre-approval vs. pre-qualification in Maryland and 5 things never to do after applying for a mortgage.

Want me to run the actual break-even on your specific loan? Call (301) 357-1170 — share the two rate quotes and I'll do the math in 5 minutes.