Mortgage rates are hovering in the mid-6% range, and every lender's website is pushing the same seductive pitch: pay a little extra now, save tens of thousands later.
That "little extra" is a discount point, and it costs 1% of your loan amount.
On a $400,000 mortgage, that's $4,000 out of pocket at closing, per point.
Here's what the sales pitch conveniently buries.
Buying points is prepaying interest, and prepaid interest only pays off if you stay in the home long enough to break even.
The industry's own term for this is the breakeven period.
A lender quotes 6.5% on a $400,000, 30-year loan, or 6.0% if you buy one point for $4,000.
Divide $4,000 by $124 and you get roughly 32 months — about two and a half years before you've recouped a dime.
That sounds like a slam dunk, because the average homeowner stays put for years.
The real question is whether you'll still have this mortgage in 2027, and life has a habit of interfering.
Sell the house in two years and you've handed the lender $4,000 for nothing.
Refinance when rates drop and those points vanish with the old loan — they don't transfer.
Here's the detail almost nobody mentions: if you refinance, any points you paid on the original loan are generally gone, while the lender keeps the benefit of having collected them upfront.
The National Association of Realtors puts the typical tenure of a homebuyer at around 10 years, but that figure is skewed by people who never move.
Then there's the tax angle people love to cite.
Points on a purchase mortgage are often deductible in the year you pay them, but only if you itemize, and the standard deduction is so high now that most households take it and get zero benefit.
If you're taking the standard deduction, that deduction isn't worth the paper it's printed on.
Points are paid in cash at closing, the exact moment you're also covering inspections, title insurance, moving trucks, and a down payment.
Draining savings to buy a lower rate leaves you with no cushion for the furnace that dies in February.
A modest emergency fund usually beats a slightly lower monthly payment.
It collects thousands upfront and locks you into a relationship.
The loan officer often earns more on a points purchase.
You might win too — but only if the math and your life both cooperate, which is a bigger if than the brochure admits.
When points genuinely make sense: you're certain you'll stay well past the breakeven date, you're not financing the points into the loan, and you've already got a healthy emergency fund.
In that case, ask your lender for a full loan estimate showing both scenarios side by side and calculate the breakeven yourself rather than trusting a friendly estimate.
For everyone else — especially first-time buyers, anyone who might move for work, or anyone who'd be paying points with money they can't spare — the no-points route is usually the safer bet.
It keeps cash in your pocket and options open.
The takeaway: points are a bet on your own future, and you're wagering real money against a lender that already knows the odds.
Do the breakeven math before you sign, and be honest about how long you'll really stay.
Final Thoughts
If you can't answer that with confidence, keep your cash and take the higher rate.