Lenders love to pitch discount points right now.
With mortgage rates hovering in the high 6s for a 30-year fixed loan, paying a chunk of cash upfront to "buy down" your rate sounds like a no-brainer.
One point typically costs 1% of your loan amount and shaves somewhere between 0.25% and 0.5% off your rate.
On a $400,000 loan, that's $4,000 out of pocket to save maybe $100 a month.
Here's the part the sales pitch skips: you only come out ahead if you stay in that house long enough to earn back what you paid.
That break-even point is the entire ballgame, and it's different for every borrower.
A $400,000 loan at 6.75% runs about $2,594 a month in principal and interest.
Pay one point to drop it to 6.5% and the payment falls to roughly $2,528 — a $66 monthly savings.
Divide your $4,000 cost by $66 and you get about 60 months.
Five years just to get your own money back.
Sell or refinance before then and you've handed the lender a gift.
The break-even clock gets worse when you buy more points.
Two points on that same loan might cost $8,000 and save $130 a month, pushing your break-even past five years again.
The savings stack, but so does the upfront risk.
There's a quieter cost people miss: the cash itself.
That $4,000 could go toward your down payment, an emergency fund, or paying down a credit card charging 22%.
Money spent on points is locked in the house — you can't pull it back out easily if a furnace dies or a job changes.
Points can still make sense for a specific type of buyer.
If you're putting down roots for a decade, have a fully funded emergency savings account, and plan to keep the loan rather than refinance when rates dip, buying the rate down is a reasonable move.
The longer your timeline, the better the math gets.
The smart move is to ask your lender for a loan estimate showing both options side by side — one with points, one without — and calculate the break-even yourself.
Don't let anyone hand you a monthly payment number without the years-to-recoup figure attached.
One more thing worth checking: seller-paid points.
In a slower housing market, some sellers will cover discount points as a concession to close the deal.
That's the rare version of this where you get the lower rate without spending your own cash.
Our take: points aren't a scam, but they're sold like a discount when they're really a bet on your own future.
Final Thoughts
If you can't confidently say you'll be in the home past the break-even date, keep the cash and take the higher rate.