Buying mortgage points can lower your interest rate — but is it worth the upfront cost? Learn how to decide whether discount points make financial sense for your loan.
💬 Introduction
You’re reviewing your mortgage estimate and you notice a line item labeled “Points” or “Discount Points.”
It sounds like a deal — you pay more upfront and get a lower interest rate.
But should you take it?
At Loan Verdict, we help clients analyze when paying mortgage points actually saves money — and when it’s a strategy that benefits the lender more than the borrower.
Here’s what you need to know.
🎯 What Are Mortgage Points?
Mortgage points, also known as discount points, are fees paid to your lender at closing in exchange for a lower interest rate.
🧮 Typically, 1 point = 1% of the loan amount
💰 Each point generally reduces your rate by 0.25%
📌 Example:
On a $400,000 loan, 1 point = $4,000
That might lower your rate from 6.5% to 6.25%
💡 When Buying Points Might Make Sense
Paying points can be smart if:
You plan to stay in the home long-term (7+ years)
You’re not likely to refinance or sell in the near future
You have extra cash at closing and want to reduce your monthly payment
The break-even point works in your favor
⏳ What’s the Break-Even Point?
To determine if paying points is worth it, calculate how long it will take to recover the upfront cost with monthly savings.
Let’s say:
1 point costs $4,000
It saves you $80/month on your payment
$4,000 ÷ $80 = 50 months (4.2 years)
📌 If you’ll stay in the home longer than that, paying points may save money.
If not, you're likely overpaying upfront for savings you’ll never see.
🚩 When It Doesn’t Make Sense
Avoid paying points if:
You plan to refinance, relocate, or sell in the next 5 years
You’re tight on cash at closing
Your monthly savings are minimal
You haven’t received a side-by-side comparison showing actual long-term savings
Some lenders include points automatically to make your rate look lower. Don’t accept it without doing the math.
🧠 How Loan Verdict Helps
When we review your Loan Estimate, we’ll:
Break down how much each point costs
Calculate your true break-even point
Show whether points are saving you money — or not
Help you compare alternative loan structures
Give you an unbiased recommendation: Buy points or skip them
🔗 Related Resources:
Mortgage Points Calculator – NerdWallet
Discount Points Explained – CFPB
🙌 Final Thoughts
Mortgage points aren’t always bad — but they’re not always good either.
The key is making the decision based on your timeline, your budget, and your long-term plans — not what looks good on paper today.
✅ Call to Action
Thinking about paying mortgage points? Let’s run the numbers first.
Schedule your consultation now at www.loanverdict.com — and let’s make sure it actually makes sense.
