Mortgage rates are hovering in a range that makes every basis point feel personal, and lenders are leaning hard into the oldest upsell in the playbook: pay now to save later.
It's called buying points, and whether it's worth it depends less on the sales pitch and more on how long you actually plan to stay in the house.
One discount point costs 1% of your loan amount.
On a $400,000 mortgage, that's $4,000 upfront, typically in exchange for shaving your interest rate by about 0.25%.
Lenders quote this as a simple trade, but the real question is how many months of lower payments it takes to earn that money back.
A $400,000 loan at 6.5% runs about $2,528 a month on principal and interest.
Drop the rate to 6.25% with one point, and the payment falls to roughly $2,463.
That's $65 a month in savings against a $4,000 upfront cost.
Divide the cost by the monthly savings and you get a break-even point of about 61 months, or just over five years.
Stay in the home longer than the break-even window and you come out ahead.
Sell or refinance before it, and you handed the lender thousands of dollars for nothing.
This is why points are a terrible fit for buyers who expect to move in three years, and a reasonable fit for someone who just bought a forever home with a fixed-rate loan.
Points are prepaid interest, and the IRS generally lets you deduct them in the year you pay them, but only on a loan used to buy or build your primary residence.
Refinance points have to be deducted over the life of the loan instead.
That tax treatment can tilt the math, but it shouldn't be the reason you write the check.
A no-points loan does the opposite: higher rate, lower cash due at closing.
That matters most for buyers already stretched thin on down payment and closing costs.
Keeping $4,000 in the bank instead of wiring it to the lender can mean the difference between a comfortable emergency fund and a credit card balance the first time the water heater dies.
Some borrowers split the difference, paying for a partial point reduction rather than a full one.
Others ask the seller to cover points as part of the negotiation, which effectively lowers the rate without touching their own savings.
That strategy tends to work best in soft markets where buyers have leverage.
The practical move is to request two Loan Estimates from the same lender, one with points and one without, then compare the total interest paid over your realistic time horizon, not just the monthly payment.
Lenders are required to provide these documents within three business days of your application, and they're formatted for exactly this comparison.
One more consideration: a permanent rate buydown is not the same as a temporary one.
Builder-funded 2-1 buydowns drop your rate for the first two years and then snap back to the full amount, which can shock a household budget that got comfortable.
Permanent points never expire, which is the entire point. **Our take:** Buying points is a bet on your own patience, and it only pays off if you stay put long enough to collect.
Final Thoughts
Run your break-even number before anyone talks you into writing a bigger check at closing.