Mortgage rates have been bouncing between 6% and 7% for months, and lenders are pushing hard on discount points as a way to buy the rate down.
Pay one point, roughly 1% of your loan amount, and you shave a fraction off your interest rate for the life of the loan.
On a $400,000 mortgage, that's $4,000 upfront, and it could save you $60 to $80 a month depending on the lender.
The math sounds clean until you run the break-even.
At $70 a month in savings, it takes nearly five years just to recoup the $4,000.
Sell, refinance, or get transferred before that point, and you've handed the lender free money.
Freddie Mac data has long shown the average American homeowner keeps a mortgage for about seven years, but that average hides a lot of people who move in two or three.
The gap between average rates and buy-down offers is also shrinking.
When the spread between a no-points loan and a one-point loan is only a quarter of a percent, the payback stretches past six years.
When it's half a percent, the case gets stronger.
Lenders rarely advertise which side of that line you're on, so you have to ask for both quotes in writing on the same day.
Points aren't the only upfront cost competing for your cash.
On a $400,000 purchase, that's $8,000 to $20,000 before you've paid a single point.
Buyers who drain savings to lower the rate leave themselves exposed to a furnace replacement, a medical bill, or a layoff with no cushion.
There's also a tax angle that trips people up.
Points on a purchase mortgage are generally deductible in the year paid, but points on a refinance usually have to be spread across the loan's life.
That changes the real break-even, and it changes again if you take the standard deduction instead of itemizing.
At today's standard deduction levels, plenty of households get no tax benefit at all.
The smarter play for most buyers right now is a no-points loan plus a dedicated savings buffer.
If rates fall later, you refinance and the points you didn't buy disappear anyway.
If rates rise, you're locked in without having sunk thousands into a bet on staying put.
The one clear exception: buyers who are certain they'll stay past the break-even, have cash beyond their emergency fund, and plan to itemize.
Ask your lender for a side-by-side Loan Estimate showing zero points, one point, and two points, with the break-even month calculated for each.
If the loan officer can't produce that in writing, that's your answer about who the points actually benefit.
The bottom line: points are not a discount, they're a wager on your own future.
Most Americans move, refinance, or need that cash for something else long before the bet pays off.
Final Thoughts
Keep the money, take the higher rate, and stay flexible.