Mortgage rates are hovering near two-year lows, and lenders are pushing a familiar menu: pay points now to lower your rate, or skip them and keep the cash.
The math behind it is not, and the break-even timeline most buyers never calculate is where the money actually gets decided.
One point costs 1% of your loan amount and typically shaves somewhere between 0.25 and 0.5 percentage points off your rate, though that trade-off varies by lender, loan size, and the day you lock.
On a $400,000 mortgage, one point runs $4,000 upfront.
Say you're choosing between a 6.25% rate with no points and a 6.0% rate after paying one point.
The lower rate might save you roughly $60 a month.
Divide that $4,000 by $60 and your break-even lands around 67 months — five and a half years.
Sell, refinance, or die before that point and you handed the lender thousands for nothing.
The average American homeowner now stays in a home for about a decade, but that's an average.
First-time buyers, job-changers, and growing families move sooner all the time.
If you expect to relocate in three years, buying points is usually lighting money on fire.
Points are interest paid upfront — cash in hand today instead of a stream of payments that depends on you actually sticking around.
It also makes the advertised rate look better in a comparison table, which is precisely the point.
Some lenders even market "no-cost" refinances that quietly bundle the costs back into a higher rate.
There's a second trap: paying points out of your down payment money.
If buying $4,000 in points drops your down payment from 20% to 19%, you've likely triggered mortgage insurance, a monthly fee that can easily wipe out the rate savings and then some.
Keeping 20% down and skipping points is often the better move.
Points can still make sense in specific cases — if you have stable income, plan to stay put well past the break-even, have cash beyond your emergency fund, and the rate reduction is large enough to matter.
Lenders should give you a Loan Estimate that lists points clearly on page 2.
Ask for the break-even in writing, then check it yourself.
If rates fall and you refinance in two years, any points you paid on the original loan are gone.
You paid for a lower rate you no longer have.
Closing take: the points question isn't really about rates, it's about how long you'll stay and how much cash you can afford to lock up.
Final Thoughts
Run the break-even, add a year of cushion, and if the math still works, fine.