Mortgage Points: Should You Buy Down Your Rate?

What Are Points?

One mortgage point equals 1% of your loan amount and typically reduces your rate by 0.25%. On a $400K loan, one point costs $4,000 and saves about $65/month.

Break-Even Analysis

$4,000 cost / $65 monthly savings = 61 months (about 5 years). If you stay in the home longer than 5 years, buying points saves money.

When It Makes Sense

Buy points if: you plan to stay 7+ years, you have extra cash after down payment and reserves, and current rates are high (you might refinance before break-even).

Negative Points (Lender Credits)

You can also take a higher rate in exchange for credits toward closing costs. Good for buyers who plan to refinance when rates drop.