Mortgage rates are still hovering well above the lows of 2020 and 2021, and that has pushed a once-boring question back into the spotlight: should you pay points to buy down your rate?
Lenders are pitching the idea hard right now, because a lower advertised rate makes their offer look better in a side-by-side comparison.
Whether it actually saves you money depends on numbers most buyers never bother to run.
One discount point costs 1% of your loan amount and typically shaves about 0.25% off your interest rate.
On a $400,000 mortgage, one point runs you $4,000 upfront for a rate cut from, say, 6.75% to 6.5%.
That sounds small, but over 30 years it can add up to tens of thousands in interest savings.
The catch is that "over 30 years" part, which almost nobody actually does.
The number that matters is your break-even point.
If paying $4,000 saves you roughly $65 a month, you need about five years just to get your own money back.
Sell, refinance, or move before then and you handed the lender a gift.
According to data from Freddie Mac, the average homeowner now stays in their home for around a decade or longer, which technically clears the bar — but averages hide a lot of people who move in two or three years for jobs, family, or a better house.
There's a second issue nobody advertises.
Points are prepaid interest, and if you itemize, they may be deductible in the year you pay them — but the standard deduction is so large now that most households take it and get zero tax benefit.
That quietly kills part of the pitch for a huge chunk of buyers.
Talk to a tax professional about your situation rather than assuming the write-off applies.
That $4,000 could sit in a high-yield savings account earning 4% or more, pay down other debt, or cover an emergency fund during the first expensive year of homeownership.
New owners routinely underestimate closing costs, moving expenses, and the surprise repairs that come with a first house.
Draining cash reserves to chase a slightly lower rate can leave you vulnerable at exactly the wrong moment.
They get cash today instead of payments spread over decades, and they can advertise a lower rate to win your business.
That doesn't make points a scam — for buyers with plenty of cash, a long time horizon, and no plans to refinance, they can be a genuinely smart move.
It's just a bet, and you should know you're placing it.
If you're comparing loan offers, ask each lender for a full loan estimate showing the rate both with and without points, then calculate your own break-even month.
Don't let a loan officer do that math for you, and don't let a lower headline rate distract you from a higher total cost.
The honest take: points are a tool, not a deal.
They reward certainty and punish flexibility, and most first-time buyers don't have as much of either as they think.
Final Thoughts
Run the break-even before you sign anything, and be skeptical of anyone who tells you it's a no-brainer.