Mortgage rates hovering near 7% have homebuyers hunting for any lever to pull, and lenders are pushing "buying down the rate" harder than ever.
The pitch sounds simple: pay extra cash upfront, lock in a lower rate, save money over time.
But the math on mortgage points is far less friendly than the sales script suggests, especially for buyers who don't plan to stay put for a decade or more.
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, 7% to 6.75%.
Your monthly payment falls by roughly $65.
Divide that $4,000 by $65 and you get a break-even point of about 61 months — just over five years before you see a single dollar of benefit.
That break-even timeline is where most buyers get tripped up.
The average American homeowner now stays in their home for roughly 10 to 12 years, according to industry data, but that figure is skewed by long-tenured owners.
First-time buyers and younger households move far more often.
If you sell, refinance, or relocate in four years, you handed the lender thousands of dollars for nothing.
There's a second trap: points aren't free money even when you do stay.
That $4,000 could instead sit in a high-yield savings account earning 4% to 5%, or pay down higher-interest debt like a credit card charging 20%+.
Paying off a $4,000 balance at 22% APR saves far more than the mortgage rate reduction ever will.
Opportunity cost rarely makes it onto the loan estimate, but it's real money.
When you're certain you'll hold the loan well past break-even, you have cash beyond your emergency fund and down payment, and you've already shopped at least three lenders.
Points are also worth a look if a seller is covering closing costs and you can direct that credit toward a rate buy-down instead of pocketing it.
In those narrow cases, the math can work.
The better move for most buyers right now is comparison shopping without points first.
A single lender quoting 7.25% with no points can be beaten by another quoting 6.875% with no points — no upfront cash required.
Getting four or five quotes takes an afternoon and can save more than a point buy-down ever would.
Ask every lender for a Loan Estimate and compare the rate, origination fees, and total closing costs side by side.
Also watch for "no-cost" refinance offers and lender credits, which often come bundled with a higher rate.
That's the same trade flipped in reverse, and it can be the smarter play if you expect rates to fall and plan to refinance within a few years.
Paying for a lower rate today locks you in; taking a credit keeps your options open.
One more thing: points are generally tax-deductible in the year you pay them on a purchase mortgage, which softens the sting slightly.
But that deduction is small compared to the break-even gap most buyers face.
Don't let a modest tax benefit justify a decision that only pays off in year six.
The bottom line is that points are a bet on your own future — on staying put, on not refinancing, on rates not dropping enough to make you want a do-over.
Most Americans shouldn't take that bet without running their own break-even number first.
Final Thoughts
If the payoff date lands past when you realistically expect to move, keep the cash and take the higher rate.