Two neighbors close on identical $400,000 homes the same week.
One pays $2,400 at closing to buy down the rate.
The other pockets that cash and takes the higher rate.
Five years later, one of them is quietly ahead by thousands — and it isn't always the one who wrote the bigger check.
One point costs 1% of your loan amount and typically shaves 0.25% off your rate.
On a $350,000 loan, that's $3,500 upfront to drop from, say, 6.75% to 6.5%.
Your monthly principal-and-interest payment falls roughly $56.
The break-even point lands around 62 months — just over five years.
Stay past break-even and buying points wins.
Sell, refinance, or get relocated before it, and you handed the lender free money.
With today's rates still elevated and home prices stubborn, few buyers expect to stay put for a decade anymore.
The average homeowner now keeps a mortgage for about seven years, but that's an average — your job, your family, and your local market decide your real number.
There's a second trap: points are paid from savings you could invest or keep as an emergency fund.
A $3,500 lump sum sitting in a high-yield savings account at 4% earns about $140 a year.
That doesn't erase the points advantage over time, but it narrows it.
Run both scenarios with a real calculator, not a lender's sales pitch.
Points on a purchase mortgage are generally deductible in the year you pay them if the loan is secured by your main home and you meet IRS rules.
On a refinance, you usually deduct them gradually over the loan's life.
That can tilt the math slightly toward paying points, but only if you itemize — and most filers now take the standard deduction.
In a slow market, asking the seller for a 1% credit toward points is often easier than negotiating the price down.
You get the lower rate; they get the sale.
Just confirm your lender allows it and that the credit is spelled out in the contract.
No-points loans aren't automatically smarter, either.
Lenders sometimes charge a higher rate to cover their costs, plus origination and closing fees that show up regardless.
Compare the annual percentage rate, not just the headline rate, and ask for a Loan Estimate from at least three lenders on the same day.
Instead of permanent points, some builders and lenders offer a 2-1 buydown that cuts your rate by 2% in year one and 1% in year two.
It eases the first-year payment while you adjust to ownership costs, but the rate snaps back.
Read the fine print before celebrating the low number.
The honest answer is that points are a bet on time.
If you're certain you'll stay and you have cash beyond your emergency fund, buying points can lock in meaningful savings.
If your life is mobile or your savings are thin, the flexibility is worth more than the discount.
Our take: treat points like any other investment — know your break-even, stress-test it against a move or a refi, and never let a lender rush you into the decision at the closing table.
Final Thoughts
The right answer is the one that survives your actual life, not the one that looks best on a rate sheet.