Mortgage rates are still hovering in the mid-6% range, and lenders are dangling a familiar trade-off: pay more upfront to buy a lower rate, or keep your cash and take the higher one.
In practice, it's a break-even calculation that too many buyers skip.
One point costs 1% of your loan amount and typically shaves somewhere between 0.25% and 0.5% off your rate, depending on the lender and the day.
On a $400,000 loan, one point runs $4,000.
Say you're choosing between a 6.5% rate with no points and a 6.0% rate with two points, costing $8,000.
The monthly payment difference is roughly $128.
Divide your $8,000 cost by that savings and you get about 62 months — a little over five years — before you break even.
If you plan to stay put for a decade, buying the rate down can save real money over the life of the loan.
If there's any chance you'll sell, refinance, or relocate in three or four years, that upfront cash is likely gone for good.
Points are tax-deductible in the year you pay them on a purchase loan, which softens the upfront sting for itemizers.
On a refinance, the deduction usually has to be spread across the loan's life — another reason the math shifts depending on what kind of loan you're taking out.
A point at one bank might cut your rate by 0.4%; at another, just 0.2%.
Always ask for the full loan estimate and compare the same loan amount and term side by side.
A lower rate with higher fees isn't automatically the better deal.
That $8,000 could sit in a high-yield savings account earning 4% to 5%, pay down higher-interest debt, or cover closing costs and moving expenses.
Paying points only wins if the guaranteed return — your lower rate — beats what that money could do elsewhere.
One more wrinkle: some buyers take a lender credit instead, accepting a slightly higher rate in exchange for help with closing costs.
That's the reverse trade, and it can make sense for people who are cash-tight or expect to move soon.
The takeaway isn't that points are good or bad.
It's that the answer depends on a number most buyers never calculate: how long you'll actually keep the loan. **Our take:** Run the break-even math before you let a lender talk you into points, and be honest about your timeline.
If you can't picture staying past five years, keeping the cash usually wins.
Final Thoughts
If you're planting roots for the long haul, a bought-down rate can quietly pay you back for years.