Mortgage rates are still hovering near 6.5% for a 30-year fixed loan, and lenders are pushing a familiar menu: pay extra upfront for a lower rate, or keep that cash and take the higher number.
The right answer depends on how long you'll actually stay in the house, and most buyers guess wrong.
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, 6.5% to 6.25%.
Your monthly principal and interest payment falls from roughly $2,528 to about $2,463.
Now the part lenders rarely highlight: you need to divide the upfront cost by the monthly savings to find your break-even point.
In this example, $4,000 divided by $65 comes out to about 61 months — just over five years.
Stay in the home longer than that and the points were worth it.
Sell or refinance before then and you handed the lender free money.
That $4,000 has to come from somewhere, and if it drains your emergency fund or pushes your down payment below 20%, you'll trigger mortgage insurance that can cost $100 to $200 a month.
Paying points while paying PMI is often a wash at best.
Taxes matter too, though less than people assume.
Points on a purchase mortgage are generally deductible in the year you pay them, but the standard deduction is now $14,600 for single filers and $29,200 for married couples filing jointly.
Many households don't itemize at all, so that deduction may be worth nothing to you.
The smarter move for most buyers right now is a no-points loan paired with a larger down payment or a padded savings account.
Once you hand that money over, it's locked into the loan and you can't get it back if life changes — a job offer in another state, a growing family, a divorce.
If you're the type who plans to stay put for a decade or more, buying points can make sense, especially if you can negotiate a break-even under four years.
Ask your lender for a side-by-side Loan Estimate showing both scenarios with the same closing date.
It takes two minutes and can save you thousands.
One more thing: rate buydowns from sellers are a different animal.
In a slow housing market, builders and sellers often fund points as a concession, which lowers your rate without costing you a dime.
Always ask whether the seller will contribute before you write your own check.
Our take: for most American households today, the flexibility of no points beats the modest savings of a buydown.
Unless you're certain you'll stay past the break-even and the cash isn't needed elsewhere, keep your money and take the higher rate.
Final Thoughts
You can always refinance later — you can never un-pay a point.