Should I Pay Discount Points?
Discount points allow you to pay more at closing in exchange for a lower lifetime interest rate. We help you calculate the "break-even point" to see if it's a smart investment for your loan.
How Points Work
One "point" typically costs 1% of your loan amount and lowers your interest rate by approximately 0.25%. Here is the math on a $400,000 loan:
The Cost
Paying 1 point costs $4,000 upfront at closing.
The Savings
A 0.25% lower rate might save you $65/month. You would "break even" in roughly 61 months.
When Paying Points Makes Sense
Paying points is essentially "pre-paying" interest. It's a smart move if you plan to keep the home or the loan long enough for the monthly savings to outweigh the upfront cost.
- Long-Term Residency: If this is your "forever home" and you plan to keep the mortgage for 7+ years, points almost always win.
- Seller Credits: If you negotiated a seller credit for closing costs, using that money to buy down your rate is often the best use of those funds.
- High-Rate Environments: In a market with higher rates, a small buy-down can make the difference in qualifying for the home you want.
- Fixed-Income Planning: If you want the absolute lowest possible monthly payment to protect your cash flow, points can help achieve that.
Get a Custom Point vs. Rate Analysis
Rob Miller will run a side-by-side comparison of multiple rate and point options for your specific loan. We'll show you exactly how many months it takes to break even so you can make a data-driven decision.
Request My Rate Analysis