Should I buy points on my mortgage?

Buy mortgage points if you plan to keep the loan long enough for the monthly savings to exceed the upfront cost — typically 3–7 years depending on the rate reduction offered. If you expect to sell or refinance before break-even, skip the points.

Whether to buy mortgage points is a break-even math problem. One discount point costs 1% of your loan amount and typically lowers your interest rate by a small fraction — the exact amount depends on the lender and market conditions. The question is simple: will you keep the loan long enough for the monthly savings to repay the upfront cost? The CFPB's guide on discount points walks through the core calculation.

The break-even calculation

Break-even month = upfront cost of points ÷ monthly payment savings. If you pay $4,500 in points (1.5 points on a $300,000 loan) and save $75/month in interest, break-even is 60 months (5 years). Keep the loan past 5 years and you come out ahead. Sell, pay off, or refinance before 5 years and you paid more than you saved.

Break-even example

$350,000 mortgage. Rate without points: 7.00%. Rate with 1 point ($3,500): 6.75%. Monthly savings: approximately $60/month. Break-even: 58 months (~4.8 years). If you plan to stay in the home 7+ years without refinancing, the point likely pays off. If you'll move in 3 years or refinance when rates drop, skip the points.

When buying points makes sense

You're buying a forever home (or plan to stay 10+ years) — break-even is well within your horizon.
Rates are at a cyclical high and you don't expect to refinance soon — you'll keep the rate long enough for points to pay off.
You have the cash — paying points shouldn't drain your emergency fund or strain closing costs.
The rate reduction per point is generous — compare multiple lenders; the value of points varies significantly.

When to skip points

You expect to refinance — if rates drop 1–2% in 2–3 years and you refinance, you haven't kept the loan long enough to recoup the point cost.
You'll move within 5–7 years — most people don't hold their first mortgage to term.
Cash is tight at closing — money spent on points could otherwise go to reserves, a larger down payment (avoiding PMI), or renovations.
The rate reduction is small — some lenders offer poor value on points; always calculate break-even for the specific offer.

Lender credits: the inverse of points

Lender credits are the opposite: the lender pays some of your closing costs in exchange for a higher interest rate. They make sense when you're cash-constrained at closing and expect to sell or refinance within a few years — you trade a higher rate for reduced upfront costs, betting the loan won't last long enough for the higher rate to cost more than the closing credit received.

Sources

By law, discount points on a Loan Estimate must be directly tied to a reduced interest rate — lenders cannot charge points as general fees. — CFPB — Lender Credits and Discount Points
In 2023, more than 56% of single-family loan originations paid some discount points — nearly double the 2021 share — as higher rates made rate buy-downs more attractive to borrowers. — CFPB — Data Spotlight: Discount Points
Freddie Mac advises that discount points make financial sense primarily for borrowers who plan to stay in their home long enough to recoup the upfront cost through lower monthly payments. — Freddie Mac

Key takeaways

Calculate break-even: cost of points ÷ monthly savings = months to recoup. Only buy if you stay past that date.
Points make sense for long-term holds (7+ years) when rates are elevated and you don't expect to refinance soon.
Skip points if you expect to move within 5–7 years or if rates may drop and prompt a refinance.
Don't drain cash reserves to buy points — financial cushion at closing matters more.
Compare points offers across multiple lenders — the rate reduction per point varies significantly.

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