Mortgage rates have been bouncing around 6% to 7% for most of the past two years, and lenders are pushing hard on a classic upsell: pay discount points up front, lock in a lower rate, save tens of thousands over the life of the loan.
One discount point costs 1% of your loan amount and typically shaves about 0.25% off your interest rate.
On a $400,000 mortgage, that's $4,000 upfront to drop from, say, 6.75% to 6.5%.
Divide $4,000 by $63 and you get a break-even point of about 63 months — a little over five years.
Stay in the home longer than that, and points can come out ahead.
Sell, refinance, or move before then, and you've handed the lender thousands of dollars for nothing.
With the average American homeowner moving every 8 to 10 years, the calculator says points win — but averages hide a lot.
First-time buyers often trade up within five years.
Job relocations, growing families, and divorces don't check the break-even calendar.
That $4,000 could sit in a high-yield savings account earning 4% or more, or pay down a credit card charging 22%.
Paying points means locking that money into the house, where you can't touch it without selling or taking out a costly home equity line.
If an emergency hits in year two, the "savings" from points won't help you.
You keep the cash, the rate stays higher, and your monthly payment is bigger.
But you preserve flexibility — and you can always refinance later if rates fall, often without losing anything, because you never paid for the lower rate in the first place.
That option has real value in a rate environment this unstable.
One more factor buyers forget: points are tax-deductible in the year you pay them on a purchase mortgage, which softens the upfront hit for some filers.
Talk to a tax professional before counting on it.
Buyers with stable jobs, a fully funded emergency savings account, and a strong likelihood of staying put for at least seven years.
Everyone else — especially anyone stretching to afford the down payment — is usually better off keeping the cash and taking the higher rate.
Our take: lenders sell points because points are profitable for lenders, not because they're right for you.
Run your own break-even math, assume you'll move sooner than you think, and treat that upfront cash as the scarce resource it is.
Final Thoughts
A slightly higher rate you can refinance beats money you can never get back.